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Nial Fuller

NIAL FULLER
Professional Trader, Author & Trading Coach

The Difference Between Price Action Event Zones and Support & Resistance Levels

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By in Forex Trading Strategies By Nial Fuller Last updated on | 62 Comments

Two of the primary features of any price chart that are critical components for any price action trader to thoroughly understand, are support & resistance levels and price action event zones.

You are probably more familiar with “support and resistance levels” since they are one of the more basic technical analysis concepts and are pretty easy to understand.

However, price action event zones (also called event areas) are something I came up with years ago and so they may be a bit less familiar to you. But, they are equally as important as standard support & resistance areas, if not more.

In today’s lesson, I wanted to take some time to teach you about both of these pieces of the technical analysis ‘puzzle’ as well as assist you in differentiating between the two.

An elephant never forgets, neither does the market…

Elephants are said to have one of the best memories in the animal kingdom. The market, also has an amazing ‘memory’ in that major turning points on a price chart tend to carve out levels and zones that remain relevant for months and years into the future.

How many times have you seen a market turn, virtually on a ‘dime’, and then you zoom the chart out and see that same level was also a major turning point multiple years ago? THESE are the types of price action ‘footprints’ that we NEED to learn to follow and utilize.

Whilst I have written an article about event areas before, titled The Market Never Forgets, I want to reiterate exactly what these important areas on the chart are…

An event area (or zone) is a significant horizontal area on chart where an obvious price action signal formed OR from which a massive directional (up or down) move initiated (such as a massive sideways trading range breakout, for example). You can and should think of these event zones as a “hot spots” on the chart; a significant / important area on a chart that we should continue watching carefully as price retraces back to it in the future. We have an expectation that next time / if price re-visits these event zones, the market will AT LEAST pause and ‘think’ about whether or not it will reverse direction there.

  • Event zones are key price action signal areas or major breakout zones from a key level or consolidation.
  • Support & resistance levels are obvious horizontal levels that are drawn on a chart connecting bar highs or lows that are at or near the same price level. These levels can remain relevant on the chart for days, weeks or years, but they are, overall, less significant than price action event zones. See my tutorial on how to draw support and resistance levels for more.

Price Action Event Areas

As discussed above, a price action event area will remain relevant well after it forms. If a market comes back and re-tests these areas, they provide a “hot spot” and a good opportunity-area to look for a second chance trade entry. So, don’t worry if you missed the original move from the event area, there is usually another opportunity at an event zone and the market will be there tomorrow, don’t forget!

Large and significant events / moves on the price charts are remembered and other professional traders know this. These past event zones often become self-fulfilling turning points simply because so many other traders expect price to turn there and are already waiting to buy or sell at them.

Let’s look at some example charts…

Perhaps the easiest way to understand a “price action event area” is by a clear and unmistakable event, such as a pin bar signal. If an obvious price action signal forms and price follows-through in agreement with the signal, making a strong move, you now have an event area at the level / area of the signal’s formation.

An important point to remember about this is that if you miss the original event move, don’t worry! You can often get a second chance entry by simply waiting for price to retrace back to that same event area. You don’t even need a price action confirmation signal on the retrace either, you can enter blindly at an existing event area. However, if you do get another clear price action signal on the retrace, as in the example chart below, it’s even better!

The event area seen below through 1305.00 in Gold, was solidified by both a signal and a breakout. Notice the first pin bar signal on the chart just above that level, then price eventually broke down through 1305.00, breaking out, further hammer-home that this level was a strong event level.

In the next event area example, we are looking at the S&P 500 daily chart. Notice that after a powerful down-move, a couple of long-tailed bullish reversal bars formed in early February, leading to a powerful up-move. The event-zone was forged at that point. We now can watch that area as a “hotspot” on the chart to watch when price pulls back to it again.

Notice the pin bar buy signal that formed after a pull back to that event zone. This was a near picture-perfect buy signal because we had the confluence of the event-zone as well as a well-defined signal.

Support & Resistance Levels

Support and resistance levels are simply horizontal levels on the chart that can be drawn across bar highs and lows. There can be many support and resistance levels on a chart, so we mainly pay attention to the more significant ones.

I’ve written several tutorials on how to draw support and resistance levels as well as how professionals draw support and resistance levels.

In the example below, notice there is not obvious price action signal and no strong breakout from consolidation or a level. These levels are just standard support and resistance levels being drawn in across bar highs and lows.

There are usually many more standard support and resistance levels than event zones on a chart, even on a daily chart time frame / higher time frame. The main point to understand about this fact, is that event-zones are more important since they reflect a major price event, whereas support and resistance levels can be drawn across smaller market turning points that are typically less significant. See example below of standard support and resistance levels.

What are the main differences between the two?

The difference between an event zone and standard support and resistance level or area can seem quite subtle, but there is a distinction.

The easiest way to put it would be, every event-zone is also a support or resistance level / area, but not every support and resistance level is an event zone.

Here’s how you can differentiate the two…

An event zone has to either have a price action signal that led to a big move OR a major price breakout from a consolidation area or level. Let’s look at some chart examples to show this more clearly:

Below, we see a clear example of an event zone, it was an event zone because:

  • It was the area on the chart where a major breakout occurred. Notice the long consolidation range before the breakout. Hence when that breakout finally occurred, it was a powerful price action “event”. This level on the EURUSD chart will likely remain relevant well into the future.

Next, we see a clear example of support and resistance levels drawn on a chart. These are not event areas because:

  • There was no long consolidation preceding a breakout.
  • There was no strong / vivid price action signal that kicked off a powerful move from these levels.

Event zones and support / resistance levels help define trade risk

Another important feature and benefit of event zones and support and resistance levels is that they help us define our risk on a trade. More specifically, they help us determine where to place our stop losses and how to know when the market has invalidated our trade idea.

You can obviously place a stop loss just beyond a support or resistance level, because if price violates that level, the thinking is that the market is changing and your original trade idea is now unlikely to work.

An event zone is often a more significant support / resistance area so it’s an even better barometer of trade risk than a standard level. If a market breaks past an event zone, you KNOW your trade idea is not working and market sentiment is severely shifting.

If you have a clear price action signal / pattern at an event zone, you can fine-tune your risk even more, because these signals are often very-high probability and hence we can place our stop loss at the high or low of the signal and often we can then enter on a retrace of the signal, on what I call a trade entry trick, which allows for huge potential risk reward trades:

Conclusion

Becoming a proficient price action trader is all about learning to skillfully interpret and properly utilize the footprint of money on the chart, this footprint is left behind as the price action plays out over time.

There are various ‘tools’ in a price action traders toolbox and the tools that I teach in my professional trading courses are (obviously) what I feel are the most important ones. Price action event zones as well as standard support and resistance levels are just as important as learning individual price action signals and patterns. Event zones and support and resistance levels play the critical role of helping you to understand the overall chart context and market dynamics that a particular trade has formed within. It is THIS interplay between the actual trade signal / entry itself and the overall market conditions it forms within, that constitutes a high-probability trading opportunity. Not simply “Oh, there’s a pin bar, I will trade it”.

It can take years of screen time and experience to fine-tune your ability to understand and properly trade with all the different pieces of the price action “puzzle”. However, learning from tutorials like this one as well as getting a more structured price action trading education will go a long way in reducing the learning curve and shortening the time required to become a master price action trader.

I REALLY WANT TO HEAR YOUR FEEDBACK IN THE COMMENTS BELOW :)

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About Nial Fuller

is a Professional Trader & Author who is considered ‘The Authority’ on Price Action Trading. He has a monthly readership of 250,000+ traders and has taught 20,000+ students since 2008. In 2016, Nial won the Million Dollar Trader Competition. Checkout Nial's Professional Trading Course here.
  1. MUNGE GATHURI September 18, 2019 at 1:23 pm

    This is an article that need to be reread as many times upto the point it is engrained the sub- conscious mind thankyou again for the great article.

    Reply
  2. caroline Alegbe September 18, 2019 at 2:25 am

    Thanks for this write up.

    Reply
  3. Yakawonya Rutson September 16, 2019 at 4:44 am

    Always out with a winner post A teacher to cherish Thanks many thanks over

    Reply
  4. eessien edet September 16, 2019 at 1:15 am

    Hi Nial,
    I enjoy reading your wisdom-filled articles on trading the financial markets. I have been trading for some years now, picking up useful trading nuggets along the way. Your latest article is, as usual, content packed.

    Thanks Nial for your awesome trading insights.

    Essien.

    Reply
  5. Nour September 15, 2019 at 11:45 am

    Nial, you are the godfather of the Forex trading.

    Reply
  6. NKAMA September 15, 2019 at 12:55 am

    You are too much sir. By this you have solved most of my problems.

    Reply
    • Ekpebo Edwin September 19, 2019 at 7:36 am

      Thanks for all the vital information on retracement trading- entry signals, stop loss placing and profit taking. You sure opened my mind to new idea.

      Reply
  7. Medi September 14, 2019 at 5:29 pm

    You tha God sent!

    Reply
  8. NGUYEN QUOC THANG September 14, 2019 at 1:28 pm

    Pls support me to explain more about ” Event area ” in the line ” Retrace Entry Back to an Event Area or Prior PA signal.

    Thank you
    THANG

    Reply
  9. Mahmudul Hasan September 14, 2019 at 1:32 am

    Super Nial bro…..

    Reply
  10. Diário de um Poupador March 5, 2018 at 1:32 am

    Hi, i am a brazilian guy who trades for years. I pause my trades during some years, and i came back about 2 months ago. I’ve been trying a strategy with short take, and it has given to me a lot of profits. I am trying to make my mind strong to ignore the market’s movement after i book profit. You have said a very right thing here: the market always makes a retraction.

    This article was very good, thanks. Keep it that way. God bless you.

    Reply
  11. Solomon Olusegun Oyeniyi December 13, 2017 at 9:24 am

    Thank you for this article.

    Reply
    • Liton khan September 16, 2019 at 12:14 am

      Very nice Boos.ok go forawd.

      Reply
  12. GANDUS December 4, 2017 at 6:10 am

    Great always to hear you big brooother Nail. God bless you. timely article for me. love

    Reply
  13. Noor Azman Abd Aziz November 26, 2017 at 2:10 am

    Nice and very interesting. This article answer the questions why i always close trades with losses while actually I have been profitting during the trading session.

    Reply
  14. Sboniso Malambule November 24, 2017 at 6:22 pm

    ive bee reading your lessons im impressed

    Reply
  15. Azmi Yusoff October 17, 2017 at 2:52 pm

    Interesting article. This happen everytime. The idea of wanting to wait a little more time may cause us to lose what is supposed to be a profit instead.

    Reply
  16. Ayanda Mabuza September 18, 2017 at 10:56 am

    reading such artecles really opens my mind.Thanks Nail

    Reply
  17. Roy Peters September 1, 2017 at 2:39 am

    This happened to me recently on Eurgbp. Up 200 pips and thought it’d go higher. Next day market came down and I booked only 40pips!
    I learn a big lesson.

    Reply
  18. Rafari July 31, 2017 at 1:29 am

    ok, its been almost 2 years since I start to learn how the market move. I can say most of your articles give me a vision about how to, what to do and don’t. It’s cool because I start move to learn draw some major snr, I got stuck on making it, but your articles show me some clever way to draw “a key level” and some short term. I’ll try my best to practice it everyday !!!

    Thanks Nial, You’re Awesome !

    Reply
  19. kgothatso July 28, 2017 at 6:00 pm

    U ar really a genus.sir u teached me that i should take a risk than to lose the chance **#great things come to those who hustle (lovely)$$$$$

    Reply
  20. Alan Gillanders June 25, 2017 at 3:25 am

    Hi Nial,
    Thanks for the lesson. This has been my problem for some time. Greed. Always waiting to take more with a small investment. My profits evaporate and majority of times end in a loss.
    In the last 6 weeks I have been taking the small profits. 100 – 200 points instead of trying to get 500-1000 points. seems to be working ok. Thanks again

    Reply
  21. oluwatosn Matthew June 23, 2017 at 5:50 pm

    That’s a good trading guide. Thanks nial.

    Reply
  22. Ages Justice June 22, 2017 at 5:40 am

    Keep it up Mentor. God bless you more!

    Reply
  23. Louis June 21, 2017 at 11:43 am

    This is exactly what was missing from my trading. Realistic exit plans. Thank you Nial.

    Reply
  24. endurance oki June 21, 2017 at 8:05 am

    thank you sir for your well prepared article. Im a victim of this very situation , i’ve almost hit my profit target then i said i should let the profit run but to my very face , the profits were evaporating until i closed the trade .

    Reply
  25. DAVID SHUBE June 20, 2017 at 7:48 pm

    Thanks Nial, booking profits on-time is right, cos too much emotional traits is involved when one realized that the trade is going to retrace unexpectedly.

    Reply
  26. PEERALLY June 20, 2017 at 6:21 pm

    Thank you, Nial.

    Reply
  27. Kate M June 20, 2017 at 6:49 am

    Thanks Nial, way to go. You keep writing evolving lessons like these, Ill always have something to learn. And again an opportune time to write this particular article, I think you are the Yoda of trading:)

    Reply
  28. Lucas Obiora June 19, 2017 at 9:07 am

    Thanks Nial, that’s an eye opener to me, I have that problem of letting profits run into losses, thank you very much for the article.

    Reply
  29. Kay June 19, 2017 at 8:49 am

    Thank you Nial, well explained and organized article. Definitively help me to prepare my Profit plan. Regards

    Reply
  30. smg June 19, 2017 at 3:17 am

    Thank you

    Reply
  31. richadi36 June 19, 2017 at 2:07 am

    Thanks Nial. I really got immense knowledge about booking profits.

    Reply
  32. Suleiman Bhadmus June 18, 2017 at 11:14 pm

    Amazing,am definitely going to include all this point in my trading plan. Though am still on demo, but what have learned from this article in very key to a successful trading.
    Thanks a lot Mr.Nail Fuller.

    Reply
  33. Matt June 18, 2017 at 5:25 pm

    This happened to me last week. Was up 700 proffit and closed with 700 loss because i had such an attachment to what i thought was a fullproof longterm move in one direction so i wanted to ride the waves but it looks like it wasnt the long term move in that direction i thouht it was.

    Reply
  34. akhtar butt June 18, 2017 at 4:44 pm

    Hi, Dear Nial Fuller, , excellent, well-explained with reality and experience. Thank, cheer

    Reply
    • Bebe April 30, 2019 at 7:57 pm

      Excellent article,Thanks Nail

      Reply
  35. Akpos June 17, 2017 at 6:46 pm

    Nice….this has been my bane in trading. Not booking profit….

    Reply
  36. John Promise June 17, 2017 at 6:02 pm

    Thanks Nial. My mentor.
    Remain blessed.

    Reply
  37. Thendo June 17, 2017 at 4:58 pm

    Thanks Nial.. great advise. Am looking forward to not closing or closing when the trade goes against you but hasn’t hit your stop loss…

    Reply
  38. Luis June 17, 2017 at 12:20 pm

    Thanks so much Neil as always, great article!, mm please i have a question, what about the case that all the other trading books and gurus says about let profits run until at least 1:2 Risk reward ratio? , because they say if i close before that 1:2 im cutting my profits and that can damage me in the long run! , but in the real life im bored to wait sometimes for a 1:2 and when im at 90% to achieve that profit target the markets turns down eliminating all my profits and making a loss for me, but when i book the profits i see my account growing, what you can reccomend me about that?.

    Reply
  39. Bruno June 17, 2017 at 10:48 am

    Before reading the whole article, I’m writing this! Just the header alone struck the cord. Toy, Nial, are a mind reading mentor! I’m at that stage in my trading where my edge is consistently delivering profits! But, yes, most times, these profits evaporate. Alot is happening around the political and business world and price is fluctuating between these events. Yes, price still does was it’ll do, but the whipsawing is alarming! I can’t say enough how soothing this article is to me because I make sizeable % of my Acct only to watch some diminish or disappear, even into losers.

    Thank you for this article.

    Reply
  40. Mavhungu Lufuno June 17, 2017 at 9:14 am

    Amen

    Reply
  41. Elpadrino June 17, 2017 at 4:54 am

    Thanks Nial #Legendary

    Reply
  42. Alin June 17, 2017 at 4:20 am

    I am one of those loosers who do not book much profits on the trades, because I’m setting
    way too large TPs. Thanks for the posting!

    Reply
  43. Shankara Motay June 17, 2017 at 3:59 am

    Thank you very much

    Reply
  44. Rongsquare June 17, 2017 at 12:44 am

    Amazing thank you Nail

    Reply
  45. Mike Coe June 16, 2017 at 11:27 pm

    Your articles just keep getting better and better, Nial! Great stuff! Thank you very much.

    Reply
  46. Siyabonga Mkhize June 16, 2017 at 11:10 pm

    Powerful thank you sir

    Reply
  47. KRISTOFA OKENTA June 16, 2017 at 9:37 pm

    Good Teaching As Always.
    Thank you For Sharing Your
    Heart With Us.

    Reply

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