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Support, resistance and key levels
Mark the prior day high and low and the overnight high and low.
Charts can look random. They are less random near certain prices. In this lesson you will learn to mark the 4 levels that most futures traders watch every single morning.
Why levels work
Price often reacts where it reacted before. Traders remember where the market turned. Orders pile up near those prices: buyers waiting to buy a dip, sellers waiting to sell a rally, and stops sitting just beyond. When price returns, all of that activity shows up again.
- Support is a price where buying has stepped in before and pushed price up.
- Resistance is a price where selling has stepped in before and pushed price down.
When support breaks, it often becomes resistance on the way back up, and the reverse is true for resistance.
The 4 levels to mark every day
- Prior day high (PDH): the highest price of yesterday's session.
- Prior day low (PDL): the lowest price of yesterday's session.
- Overnight high (ONH): the highest price since the session reopened at 6pm ET.
- Overnight low (ONL): the lowest price in that same overnight stretch.
These 4 are watched by a huge number of traders, which is exactly why they matter. Mark them with horizontal lines before the 9:30am ET open.
Example: Yesterday NQ ranged from 19,900 to 20,080. Overnight it traded between 19,960 and 20,040. At the open, price is at 20,030, just under the overnight high. A clean push through 20,040 could run toward the prior day high at 20,080. A rejection could send price back toward 19,960.
Levels are zones
Price rarely turns at the exact tick. It might stop 3 ticks short or poke 5 ticks through before reversing. Treat each level as a zone a few ticks wide. This keeps you from calling a level broken too early or placing your stop right where everyone else's is.
What price does at a level
At a level, price usually does 1 of 2 things:
- Rejects: it touches the zone and turns away, often leaving a long wick.
- Breaks: it pushes through and holds on the other side, sometimes retesting the level from the new side.
You do not need to predict which one happens. Your job is to be ready for both and act once price shows you. Lessons 14 and 15 give you 2 setups that use levels this way.
Keep your chart clean
New traders often draw 20 lines and end up with a chart that says nothing. Start with these 4 levels only. Add more later if your journal shows they help.
Practice
For the next 5 trading days, mark PDH, PDL, ONH and ONL before the open. After the session, note which levels price reacted to. You will quickly see why traders build their day around them.
Key takeaways
- Price often reacts where it reacted before.
- The prior day high and low and the overnight high and low are the 4 levels most futures traders watch.
- Treat each level as a zone a few ticks wide.
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Flight School is educational content only and is not financial advice. Futures trading involves substantial risk of loss and is not suitable for every investor. Past performance does not guarantee future results.