Resource Smoothing/Levelling

[Winston Lok]

I want to use Project to schedule resources such that it
smooths out the peaks and valleys in the Resource Graph
without having to set a limit on the resources (ie. no
over-allocation).

I've tried the Resource Levelling option under Tools but
Project does not seem to be doing anything. However, once
I set a limit on the resources (eg. the number of workers
available) the function works fine.

How can I perform resource levelling without an over-
allocation problem?

Thanks!