Forex for a trader
Urban forex support and resistance strategy

Urban forex support and resistance strategyUrban forex support and resistance strategy. Trading Strategies based on Support and Resistance are widely used in Forex Trading. First lets get the basics down. Generally speaking Support and Resistance is a straightforward concept: The market moves up and then pulls back, the highest point reached before it pulled back is the resistance. As the market continues up again, the lowest point reached before it started going back up is the support. Its vice-versa for a downtrend. Simple right. so why do we need Navin to teach us more about this. If you notice at 6:55 mark in the webinar, not everyone has the same idea of what the support and resistance levels are. Its not as simple and "straightforward" as we think it is. Most of us work on the theory of drawing our support and resistance lines to make it look visually appealing. It can be easy to do so looking at the past and they look great, one area connects to the next and it looks like "the design is working" but is that really the case? Does it always work like that. In the webinar we dig deeper into this concept. The focus point of Navin in this webinar is to have you guys think of WHY should a support and resistance work? And most importantly, when would it not work? The theory behind Support equals Resistance using Price Action is Logic.

Why will the level hold or not hold? For you car lovers, Navin uses two car analogies in his explanations (12:01 in video), a $50k Mercedes and a $100k Ford (must be a Mustang. ) Lets look at the Ford analogy which is based on you being the seller. You own the Ford. You have a chance to sell for $90k near he beginning of both scenarios but you don't. I mean it was worth $100k before right! But in the space of 2 days it drops to $60k. God Damn! Then it slowly rises again, up to $65k, $70k, $80k and drops back to $70k. Then we see the difference between the scenarios. In scenario A it shoots back up to $90k in 2 days. Awesome! But do you sell? You had the chance to sell before at $90k and you didn't. What about scenario B, it takes a week to creep back up to $90k from $70k. Do we sell now? In scenario A, it's important to note that the speed it shot back up to $90k is similar to the speed it initially dropped to $60k. Support and Resistance may not be as powerful with the sharp spike and so you might be hopeful that the price could get back up to $100k. But scenario B is a sell when it reaches $90k again. Because it went up so slowly it suggests that prices are struggling to continue to go up which is a better indicator of true support and resistance. The memory of the previous drop to $60k still looms so its time to get out of there. Navin shows actual chart examples of this theory in the Webinar starting at 32 mins.

Webinar Key Takeaways. Time is relevant to time prior (12:20) Support vs Resistance may not be as powerful when a sharp spike up or down returns it to the level in question (24:01) The players in the market are likely to change at the weekend (28:40) Focus on what can go wrong, not what can go right (30:50) You are the secret to timing (33:30) Hope this article is helpful and you enjoy the webinar, its full of funny comments and it's educational and entertaining at the same time. Let me know how you liked it in the comments section below. If you want to continue to grow your Price Action knowledge sign up below for more helpful articles and webinars. If you want to accelerate your Price Action education check out our Mastering Price Action course . With Pip Love, Garry. Attend the next LIVE Webinar! Fill out the form below to join our Webinar mailing list to get invited to the next webinar, get webinar recordings, and major announcements! Support and Resistance Trading Strategy.

Support and Resistance Forex trading strategy — is a widely used trading system based on the horizontal levels of support and resistance. These levels are formed by the candlesticks' highs and lows. A break-through of these levels after a period of consolidation gives a signal for a trend. This strategy doesn't require any chart indicators except for the ability to draw lines (at least imaginary). Well-defined low stop-loss. Relatively high success rate. Unclear target levels. Support level is formed by the lows of two or more candlestick bars that form a rather straight horizontal line with no lower lows between them. Resistance level is formed by the highs of two or more candlestick bars that form a rather straight horizontal line with no higher highs between them. Consolidation is a period without any trend, forming near support or resistance level, with the relatively small candlestick bodies. A close below the support level signals a short position. A close above the resistance level signals a long position. Stop-loss is set to the low of the previous candlestick (for the long positions) or to the high of the previous candlestick (for the short positions). Take-profit can be set relatively to the stop-loss or as a trailing stop of some sort. A period of consolidation is clearly seen on both example charts.

In both cases the supportresistance level is formed by two candles on a rather short period. Stop-loss is placed close to the entry level. Take-profit couldn't be clearly set at the position entry moment, but a riskreward ratio of not less than 1:2 could be used easily. If you are having trouble detecting support and resistance levels on the chart you can use our free MT4MT5 indicators for that: Support and Resistance or TzPivots. Use this strategy at your own risk. EarnForex. com can't be responsible for any losses associated with using any strategy presented on the site. It's not recommended to use this strategy on the real account without testing it on demo first. Do you have any suggestions or questions regarding this strategy? You can always discuss Support and Resistance Strategy with the fellow Forex traders on the Trading Systems and Strategies forum. Urban forex support and resistance strategy. If you're looking for the best forex strategies, you've come to the right place! The title of this article probably was a bit of a giveaway ;) Usually the free trading forex strategies have about the same value as the price you pay for them. They have not been tested and other than the odd review, there isn't much proof of their reliability.

However, the top 5 best forex strategies posted below are the best trading strategies that have been tried and tested by Navin Prithyani (at Urban Forex and Forex Watchers). Not every great strategy will work out for every trader. It's the trader that has to make it work, right? Part of this is knowing when to apply which strategy to the given market condition - of the time you're trading. Adapting to all market circumstances - and even knowing when to stay aside and not trade - is a key factor. This will require a lot of persistence and studying. So it certainly isn't just about picking up a strategy and applying it. It is also about education. #1. Pro Trading Forex Strategy. The Pro Trading Strategy helps traders on how to identify key candles to define the right time to enter the market. This is something that is usually missing from most strategies. The strategy is complemented by Support and Resistance lines. The strategy has been around for a number of years and has had an update in June 2016 and is still one of the best forex strategies. #2. 10 Pips Per Day Scalping Forex Strategy. The phrase 'slow and steady wins the long race' (or the story about the tortoise and the hare), fits the description of this strategy perfectly!

Instead of aiming for fast gains and risking major losses along the way, this strategy focuses on trading conservatively and gaining consistently. #3. Urban Towers Scalping Forex Strategy. This strategy's concept is simple and easy to follow and for that reason is one of the best forex strategies. The entry is very straightforward and the different exit options provide potential for each kind of trader. Just be patient, find the right setup in the market and go for it. #4. Pip Milking Forex Strategy. This is not exactly a strategy for beginners. It will take some experience in chart and pattern reading to make it work. However, once this works, it can lead to some very substantial trades. Some very successful traders have incorporated this technique into their trading and with terrific results. It works on any time frame and can be seen over and over on any chart. #5. Pivot Points MACD Divergence Forex Strategy. The pivot point technical indicator is one of the few forward looking technical indicators for trading Forex. This makes this strategy very powerful. This forex trading system is ideal in many market conditions, even in ranges. #UrbanForex - Be conscious of your trading!

Attend the next LIVE Webinar! Fill out the form below to join our Webinar mailing list to get invited to the next webinar, get webinar recordings, and major announcements! Support and Resistance Levels Trading Strategy. What is support and resistance? Support and resistance levels are horizontal price levels that typically connect price bar highs to other price bar highs or lows to lows, forming horizontal levels on a price chart. A support or resistance level is formed when a market’s price action reverses and changes direction, leaving behind a peak or trough (swing point) in the market. Support and resistance levels can carve out trading ranges like we see in the chart below and they also can be seen in trending markets as a market retraces and leaves behind swing points. Price will often respect these support and resistance levels, in other words, they tend to contain price movement, until of course price breaks through them. In the chart below, we see an example of support and resistance levels containing price within a trading range.

A trading range is simply an area of price contained between parallel support and resistance levels like we see below (price oscillates between the support and resistance levels in a trading range). Note that in the chart below, price eventually broke up and out of the trading range, moving above the resistance level, then when it came back down and tested the old resistance level, it then held price and acted as support… The other primary way support and resistance levels are created in a market, is from swing points in a trend. As a market trends, it retraces back on the trend and this retracement leaves a ‘swing point’ in the market, which in an uptrend looks like a peak and a downtrend looks like a trough. In an uptrend, the old peaks will tend to act as support after price breaks up past them and then retraces back down to test them. In a downtrend, the opposite is true; the old troughs will tend to act as resistance after price breaks down through them and then retraces back up to test them. Here’s an example of a market testing previous swing points (support) in a downtrend, note that as the market comes back to test the old support, the level then behaves as ‘new’ resistance and will very often hold price. It’s wise to look for an entry point into a trend as it comes back and tests these previous swing points (see pin bar sell signal in chart below), because it’s at these levels that the trend is most likely to resume, creating a low-risk high-reward potential: How to trade price action signals from support and resistance levels. Support and resistance levels are a price action trader’s ‘best friend’. When a price action entry signal forms at a key level of support or resistance, it can be a high-probability entry scenario. The key level gives you a ‘barrier’ to place your stop loss beyond and since it has a strong chance of being a turning point in the market, there’s usually a good risk reward ratio formed at key levels of support and resistance in a market. The price action entry signal, such as a pin bar signal or other, provides us with some ‘confirmation’ that price may indeed move away from the key level of support or resistance. In the example chart below, we see a key level of resistance and a bearish fakey strategy that formed at it. Since this fakey showed such aggressive reversal and a false-break of the key resistance, there was a high-probability that price would continue lower following the signal… The next example chart shows us how to trade price action from a support level in an uptrend. Note that once we got a clear pin bar buy signal, actually two pin bar signals in this case, the uptrend was ready to resume and pushed significantly higher from the key support level.

The next chart example show us how sometimes in trending markets a previous swing level will act as a new support or resistance level and provide a good level to focus our attention on for price action entry signals. In this case, the trend was up and a previous swing high in the uptrend eventually ‘flipped’ into a support level after price broke up above it. We can see that when price came back to retest that level the second time, it formed a nice pin bar entry signal to buy the market and re-enter the uptrend from a confluent level in the market. Finally, the last chart we are looking at is an interesting one. Note the swing low that occurred in the down trend on the left side of the chart. You can see how this level stayed relevant months later, even after the trend changed from down to up. It first acted as a resistance level after price broke down through it, but once that resistance was broken, we had an uptrend form and then after that, that same level acted as support, and that’s where we see the fakey pin bar combo signal in the chart below: Tips on Support and Resistance. Don’t get too carried away with trying to draw every little level on your charts. Aim to find the key daily chart levels, like we showed in the examples above, as these are the most important ones. The horizontal lines of support or resistance that you draw won’t always touch the ‘exact’ high or low of the bars it connects. Sometimes, it’s OK if the line connects bars slightly down from the high or up from the low. The important thing to realize is that this is not an exact science, instead it is both a skill and an art that you’ll improve at through training, experience and time. When in doubt about whether to take a particular price action entry signal or not, ask yourself if it’s at a key level of support or resistance. If it’s not at a key level of support or resistance, it might be better to pass on the signal. A price trading strategy, such as a pin bar, fakey, or inside bar strategy has a significantly better chance of working out if it forms from a confluent level of support or resistance in a market.

I hope you’ve enjoyed this support and resistance trading tutorial . For more information on trading price action from support and resistance levels, click here. Three Ways to Trade Support and Resistance. by James Stanley , Currency Strategist. Price action and Macro. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to James Stanley. You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. Support and resistance can have numerous applications and can be identified in a multitude of ways.

Traders can use supportresistance identification for managing risk in a strategy. Traders can also use support and resistance to grade market conditions, and enter positions. One of the more difficult concepts within Technical Analysis is grasping the premise of support and resistance. There are numerous ways to identify these levels, and even after identified, there are a plethora of ways of integrating and trading with them. In our first article on the topic, we looked at The Hidden Patterns of Support and Resistance in the Forex Market . We then went on to incorporate additional support and resistance mechanisms in our follow-up article, The Power of Confluence in the Forex Market . In this article, we’re going to show you three ways that traders can properly integrate these levels. Risk ManagementStop Placement. While this may be the least ‘exciting’ of the three ways to integrate support and resistance, this is also probably the most important.

Stop-loss orders help traders prevent blowing up their entire accounts on just one or two bad trade ideas. We’ve looked at the importance of stops, and further, risk management in numerous of our previous articles. Sloppy risk management is The Number One Mistake that Forex Traders Make , and this is also the Top Trading Mistake . Support and resistance can help traders to define their risk amounts for any individual position. Let’s say that a trader wants to buy in a range, and if that range doesn’t continue, they want to close out the position quickly in an effort to mitigate the loss. In this case, it makes sense to place the stop for the long position below support so that once support becomes violated, the stop-loss can close the position and the trader can look to avoid taking a larger loss. Support and resistance can help with s top p lacement. Created with MarketscopeTrading Station II; prepared by James Stanley. This can also work for reversal plays . If a trader is looking to buy a bullish reversal, they can look to the low that was established before the reversal began; and they can place their stop there. This way, if the reversal doesn’t pan out, and if prices do continue moving in the previous trend-side direction, the position can be closed as traders look to mitigate their loss. The exact opposite would be the case for short positions, with traders looking to place stops above resistance so that should the market continue rising; the short position can be closed with a minimum of a loss. Determining a Market’s Condition. We’ve all heard it since we were young: Buy low, and sell high.

If only matters were that simple. What constitutes ‘high’ and what constitutes ‘low?’ After all, these are very relative matters, and low in a market today might be sky-high a week from now. This is where support and resistance come into play, and this is why finding strong, confluent levels can be so beneficial. Think about why support or resistance may come into a market: The only real reason is due to an influx of buyers or sellers at a particular price level. Let’s say that we’re expecting support at a price of 1.6750 on GBPUSD; which is a psychological level in the currency pair. As prices move lower towards this expected support level, buyers begin coming into the market in anticipation of a future support level being so close. As prices move closer and closer to this level of support, more and more buyers notice this ‘perceived value’ in GBPUSD and they also look to enter in long cable positions. The exact low of the move is considered a ‘price action swing.’ Eventually, the number of buyers in GBPUSD outstrips the number of sellers, and this is what creates a reversal in the market as the higher level of demand takes over smaller level of supply. This is how price action works , and it happens in short and long-terms alike. Price action will also help traders see support and resistance in trending markets and ranging markets as well. We discussed market conditionality in the article The Life Cycle of Markets . In trending markets, prices will generally make ‘higher-highs’ and ‘higher-lows,’ or ‘lower-lows’ and ‘lower-highs,’ while ranging markets will generally display more stable levels of support and resistance. The example below in USDJPY shows both of these types of environments on the same chart. Current price relationship with SupportResistance can define the market’s condition.

Created with MarketscopeTrading Station II; prepared by James Stanley. After the market condition has been identified, traders can then move on to the next step of placing the trade. After traders have been able to allocate risk and grade market conditions using price action with support and resistance, they can move on to the next logical step in looking to place trades and enter positions. Remember that future prices are unpredictable. Implementing support or resistance simply gives us the possibility that support or resistance may hold; and if it does in-fact hold, then traders can look for rewards or profits that are significantly larger than the amount they had to risk. Or put another way, traders can use this as an opportunity to turn around The Top Trading Mistake and get risk management working in their favor by looking for larger rewards using smaller amounts of risk. If a trader is looking to buy an up-trend, they want to look to do so cheaply. So they can simply wait for prices to retrace a portion of the up-trend until a support level comes in to the market. This support level can be a psychological level, or a Fibonacci retracement , or a pivot point ; better yet, this support level can offer confluence from multiple types of supportresistance analysis . After price action has exhibited that the retracement may be over, the trader can look to enter long with a stop below the support level.

This way, if the up-trend doesn’t continue coming back in the market, the loss can be mitigated. But if the trend does come in, then the trader can look to profit two, three, or four times the amount they had to initially risk entering the position. We examined how traders can utilize price action to trade trends in the article, Using Price Action to Trade Trends . The image below, taken from the article, shows how traders can look to buy after this ‘higher-low’ was made in the up-trend. Price action can be used to enter positions in trending markets. But what if the market isn’t displaying a bias? If the market is ranging, traders can still utilize price action to look at risk-efficient ways of entering trades and positions. We examined this topic in-depth in the article How to Analyze and Trade Ranges with Price Action. In the image below, we illustrate how traders can use price action along with support and resistance to build a range-strategy in a market devoid of any significant trends: Price action can also be used to enter trades in ranging markets. --- Written by James Stanley. James is available on Twitter @JStanleyFX. Would you like to enhance your FX Education? DailyFX has recently launched DailyFX University ; which is completely free to any and all traders!

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Support and Resistance Zones – Road to Successful Trading. This Support and Resistance Zones Strategy will enable you to take trades exactly at the area price will reverse. Trading support and resistance lines is critical for every trader to implement into their system. In this article you will learn how to calculate support and resistance, identifying support and resistance trading zones, stock support and resistance approach to trading, along with forex trading support and resistance. I am going to guide you every step of the way how to trade support and resistance in forex, how to trade support and resistance in stocks, and how to trade support and resistance in options, with this simple to learn and easy to understand the trading strategy that we have developed. After you read this strategy, you will be able to identify these sweet spots where marvelous price action happens so keep reading and you won’t regret it. Also, read trading discipline which is also a most important skill for successful trading. What indicator are we using for this strategy? Indicators Used in the Support and Resistance Zone Strategy. Our indicators for this strategy will be price action and its relationship to Support and Resistance.

to be honest, this is, in our opinion, the best way to trade support and resistance. So what exactly are these key areas? How to trade support and resistance levels? Before we explain the strategy we are going to define support and resistance. Here is another strategy called The PPG Forex Trading Strategy. What is Support? We have a specific article on this very topic so go ahead and read that here if you do not know what support or resistance is. Support is the level where price finds it difficult to fall below until eventually it fails to do so and bounces back up. It’s simply many traders making trading decisions at that level. What is Resistance? Resistance is the level where price finds it hard to break through to rise above it until it fails to and is pushed back down. You should always suspect a reversal at Support and Resistance as there is a high probability that price action will reverse at those key levels.

That’s because it already did that before in the past and it will continue to do so in the future as traders will always take caution on these levels so some who had open trades will exit at those levels and others will initiate new trades at these levels and that’s why it is crucial to learn to draw these Zones. Steps for trading Support and Resistance Zones Strategy. Now that we know the role of S&R Lines, which from now on we will call Zones. That’s because support and resistance are not a given line if so it would super easy for traders to know and every trader on the planet would have an entry order at that price. They are more like zones that can be breached and pushed into and then it may pull the price action back out of it or maybe price action will succeed in breaking it for good so Zones and far better term to describe it. Our main purpose in this Trading Strategy is to identify those Zones and use them for our favor and make great trade entries and exit points. The First step of the support and resistance zone strategy. The first step of this strategy is drawing those Zones on our charts so that we can easily spot where the price would probably reverse. After you do this, it will resemble a support and resistance indicator only you now have zones to take advantage of. Drawing Zones on the chart is better done on a higher time frame so that we can examine the main reversal levels and the more critical points on the chart as a higher time frame shows us the bigger picture. Its almost like what we talked about in our article about the importance of multiple time frame analysis. We begin by drawing horizontal lines on recent Peaks and Bottoms like you see below in our chart example: Examine this chart as it is critical for you to understand these zones. When you are doing support and resistance trading, a line with multiple touches is far better off as it is clear that it stood against the price and passed the test for many times and it will continue to do so. WHY? Because History always repeats itself and this continues to happen time and time again on every chart that you will ever look at. (Stocks, Options, Forex) Note** Make sure to leave spaces between zones as drawing many lines will confuse you and worsen your trading decision. This strategy could easily be compared to our Red zone strategy that shows you how to draw zones on your chart.

When you take a look back after drawing Zones will find that those lines withheld the price for numerous times before and will continue to do that for numerous times more. The second step to identifying support and resistance Zones: The second step is waiting for the price action to touch the Zone so what you can do is set your charts on 2 to 4 currencies and wait for your chance as it may take some time for the price to reach the support resistance levels. The reason we say 2 to 4 currencies is because this is a good number of pairs to be looking at and will not overwhelm you mainly so you have a good judge on your trade opportunity. Basically, the higher time frame takes less time and attention than the smaller time frame alternatively, the smaller time frame has more signals as the zones may get hit more frequently so you have to be more focused if you’re trading small time frames. In this chart we see the price action approaching support and actually almost touched the support so we wait to see the form and shape of the next candle. If the price reverses that will be good as it is what we are expecting but need a strong reversal candle though to assure that price will reverse and that it will not collapse back again. On the other hand, if it breaks that level it may be real breaking or a fake breaking so we also should see a strong piercing candle that effortlessly break that level to assure it will continue on the same way. The third step for the strategy is: The Third step of this trading strategy is to wait for the candle which hits the zone to close as this will be probably the signal candle we are waiting so look at that candle. Is it a bullish or bearish candle, is it strong or weak, big or small, does it have long wicks or small wicks or no wicks at all, when you can identify the kind of candle then you will be able to decide whether to sell short or buy long. Knowing the type of candle is crucial to identify whether the entry is valid or not. In the chart example above we see how Support rejected the price and pushed back up and we see the candle that formed afterward to signal the end of the down movement and the beginning of and upward movement. So how did we know it is strong, what its secret? Before we go any further, here are some important factors in determining a strong candle because spotting that specific candle on zones makes the difference between winning trades and losing trades. The Qualities of a strong candle are: Long body Formed after the previous touched the level but could not break it. Entirely taken the two previous candles. This example shows us how a strong candle should look like as we see how the strong candle over power the one before.

Here, you can see that those weak candles were not able to breach the Resistance line and had long wicks and could not break that level so we wait to see what will happen with the next candle will the price action break that level or will the resistance win and the price reverses. On the first case ( the candle on the left that we marked for you): clearly, the price fell on the next candle which made it a valid reversal. While in the second case ( the candle on the right that we marked): we had a very small candle which did not mean anything except that the resistance stalled the price for a while. The Fourth step to this support and resistance strategy after you analyze your Zones: The fourth step is to identify where you will enter the trade. Here are the entry criteria. EntryExit Criteria for this support and resistance trading strategy: Your entry should be slightly above or below the signal candle which is the strong candle, this way you are adding more confirmation to your trade to make sure that the price will move towards the direction you expected it to move to. Our stop loss should be placed on the other side of the zone and not too close to the level to give it some space as we said it is a Zone, Putting the Stop loss there because this the end of the trade as the price is unlikely will reverse after that point. So according to the rules of thes strategy below is an example trade: We used a 3 to 1 RR but you can adjust according to your rules. Now we have learned from this Support and Resistance strategy how to draw Zones and how to trade them successfully and how to determine the direction that the price will probably move to, so we could have a better edge in our trading. If you liked this strategy or still need to more information please leave a comment below and we will answer your questions!

Trading support and resistance, and discovering support and resistance zones are pivitol to your trading success. Our Fibonacci channel strategy, and the Red zone strategy are versy similar and will help you in understanding exacly what these so-called “zones” are as well so you can check them out also if you wish! Thanks for reading! Please leave a comment below if you have any questions about Road to Successful Trading! Also, please give this strategy a 5 star if you enjoyed it! ( 2 votes, average: 4.50 out of 5) Like this Strategy? Grab the Free PDF Strategy Report that includes other helpful information like more details, more chart images, and many other examples of this strategy in action! Tap on the E-Book Cover Below to get your copy of this Free strategy today. Please Share this Trading Strategy Below and keep it for your own personal use! Thanks Traders! Support and Resistance Levels – Forex Trading Strategies. A good way to understand support and resistance trading is to picture a man trying to get past a solid fence that is blocking his way. Although he will keep searching for a passage along the outside of the fence, there is not one readily available. In the world of active trading, the fence is akin to a technical indicator known as support and resistance . What Is Support And Resistance Trading? Support and resistance trading is an approach to the market where designated technical areas are viewed as points of contention. Price is unlikely to move through these areas unfettered — its path will be challenged.

Resistance is an upper blockage appearing at the end of a bullish trend. It represents the point at which sellers outnumber buyers and the price begins to retrace to the downside. Conversely, a lower blockage appearing at the end of a bearish trend is known as support. Upon price reaching this point, the market has reached a temporary low and will begin heading going up — at least for the time being. As can be seen in the chart above, the big advantage of support and resistance levels is that they are easily distinguished. They do not require a high degree of analytical skills and are suitable for both skilled and novice traders. Keep in mind that the levels used in support and resistance trading are not precise, but generalities. It is not possible to determine the exact point at which they occur. Also, the barriers created by support and resistance levels do not last forever. Our job as active traders is to decide which levels we can trust and which have a high probability of being invalid. A good rule of thumb used in many forex support and resistance strategies is that levels proving effective three times in a row are more trustworthy than fresh levels.

Forex Support And Resistance Strategies. Going back to our man attempting to circumvent a fence. If at some point he manages to cross over, he might find himself stuck on the other side. Correspondingly, a resistance level, once cracked, can turn into a support level. This relationship also holds true for an area of support, as sellers have taken control of the market. It is important to remember that this is not an exact science. Nonetheless, with a basic understanding of market dynamics and technical analysis, this method has a very high probability of success. An example of forex support and resistance can be seen in the chart below: Among all systems applied to the forex, the support and resistance trading strategy ranks in the top five. Other common technical approaches include the trend line, moving averages, candlesticks and price action. Forex traders tend to use indicators that are highly visual and not overly complex which are difficult to follow. Forex support and resistance indicators are very easy to follow. You simply draw a line where you see two or more tops and bottoms which have previously rejected price. In the chart breakdown above, price has pierced the resistance level twice but never closed above it. As stated earlier, forex support and resistance is not an exact strategy and no indicator is precise right down to a single pip. Remember, that when you use a support and resistance approach to analyzing price action, it is better to place a stop or profit target a reasonable amount of pips abovebelow the specific price level. Breaking AboveBelow Support And Resistance Levels. Once again, it is time to return to our man and his fence.

In the event that he runs faster in order to break the barrier and is successful, it is probable that he will get stuck on the other side — possibly with broken legs! However, the situation will continue to evolve. If the man is able, he will keep moving to resist the influence of the fence and any other factors hindering his progress. The same situation may be applied to forex. When an important supportresistance level is broken, price continues to move on the other side. If the sellers break a support level, buyers become discouraged and stop buying. During the action, more sellers pile on, attracted to the bearish momentum. If buyers decide to begin selling too, the decline accelerates exponentially. When a support level breaks, the decline accelerates.

As you can see in the chart above, the previously strong 1.16 support level in USDJPY was finally broken. So, the correct forex strategy is to trade the break. In this case, trading the break meant to sell when the 1.16 support level fell. The support and resistance trading strategy is a very important methodology, found throughout the forex. It works well and is very simple. Both of these attributes provide traders with regular opportunities to make nice profits while keeping risk in check. Forex Support and Resistance Explained. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Gregory McLeod. You can manage you subscriptions by following the link in the footer of each email you will receive.

An error occurred submitting your form. Please try again later. The concept of support and resistance forms the basis of Forex technical analysis. Forex traders look to buy at or near areas of significant levels of potential support in an uptrend Forex traders look to sell at or near areas of significant levels of potential resistance in a downtrend. You may have heard to the old business cliche “buy low and sell high”. New forex traders usually ask the question how low is low and how high is high. One way we can quantify these levels is using areas where price has stopped and changed direction. The area where price stops after moving up and then turns around is called resistance. Resistance acts as a “ceiling” capping the further advance of price.

Resistance is not just some random area where price turns around. There are potential sellers, traders who have sold a Forex currency pair once before and remember the collective power they had to push price lower. There are also buyers who went long at support and were disappointed that price did not go higher and will close their buy positions with sell orders at or just before price gets to the resistance ceiling. Another group that make up resistance are the ones that bought at or near resistance and are trapped when price fell at resistance. These traders are begging for price to come up one more time to get them out at breakeven. All of these groups work together to send prices lower and make up the “supply” in the supply and demand equation. More supply than demand, price falls, more demand than supply price rises; Resistance=Supply. Learn Forex: GBPUSD Support and Resistance. Created by Gregory McLeod. In the chart above of GBPUSD levels of support are highlighted in blue while levels of resistance are highlighted in red. In an uptrend, traders look to buy at support and take profits at the next level of resistance.

By entering at or near significant levels in an uptrend, Forex traders can reduce their risk exposure and get a trading opportunity with an excellent risk to reward ratio. Forex traders are able to identify several places to trade with the trend. The levels of resistance can be used as profit target areas or breakout opportunities as price closes above resistance. Learn Forex: AUDNZD Resistance Sell Zones. C reated by Gregory McLeod. On the other hand, levels of significant resistance provide ideal entry points in a downtrend. They clearly show countertrend buyer exhaustion at point when sellers return . The next level of support can be used as a target area. Support can also be used as a breakout entry area if price closes below support. The balance of power is clearly revealed at areas of support and resistance. Price can bounce from a floor and move up to the ceiling and then bounce down. It is important for Forex traders to first identify trend direction and then choose to buy at support in an uptrend or sell at resistance in a downtrend. Additionally, oscillators like RSI and stochastics can be used to identify significant areas of support and resistance. ---Written by Gregory McLeod Trading Instructor.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. The Best Support and Resistance Levels Part 1. Verified Profitable Trader. Today I am going to give a lesson on how to find some of the best support and resistance levels in the market. If I had to say – I think there are three types which are the best support and resistance levels you could find. But it would take a long time to go into each type, what are the characteristics of each, what they mean from an order flow perspective, and how to trade each type. So I am going to cover in today’s lesson, what are some of the most critical variables to look for when evaluating support and resistance levels. If you can learn to spot these levels, read the price action and key variables before the market reaches these levels, you will greatly enhance your trading, by finding better entries, knowing how the market is likely to react off a level, and how to increase the probability of your trades. By first learning to read these key variables which I will list below, they will provide you with a lot of information in terms of; - how the order flow is relating to them - how these levels will improve the probability your trade or rule based price action system - how you can trade these key levels. Note: I want to hear your feedback on this lesson, like what key points stood out for you, what you found useful, how you can apply this to your trading, or…even if you want to throw tomatoes at me, I want to hear your comments ?? I will start this lesson by talking about what are some key things to look for when evaluating support and resistance levels. I will then describe with some details how each variable informs you of the order flow behind the price action.

Then I will go over some basic methods of how you can trade them. I will also give examples to demonstrate how these elements work, then end with a brief overview of what we covered. Key Things To Evaluate Support and Resistance Levels. If I had to list what are the key things I use to evaluate support and resistance levels, it would be the following; 1) How price reacted to this level in the past (held, became a breakout – pullback level, bounced violently or timidly off of it) 2) How significant is it (lower time frame, higher time frame, held for how long?) 3) How is price reacting or responding to it now 4) What is the speed or impulsiveness price is approaching it now 5) What is the price action context prior to this level. All of these things communicate information to me about the uniqueness of this level, how the buyerssellers reacted towards this level in the past, how likely they will respond to it in the future, and what they are most likely to do at this level. Zones & Areas. It should be noted that I do not consider support and resistance levels to be lines in the sand, but more of a ‘ zone ‘ or ‘ area ‘. That means I do not consider a resistance level to be one price, but likely several pips on either side. This could be due to differences in price feed, server time, what other traders think of that level, and how they would play it. A scalper will more likely get as tight to the level as possible, but scalping orders rarely are large in volume or market movers.

However, a swing trader or large institution will likely be getting in at several levels, and the level you might be spotting may be one of them they are placing a large order at. Because of this and all the different ways institutional players relate to these levels, support and resistance levels for me are zones or areas which could be anywhere from a few pips wide to 10+, maybe more depending upon the time frame the level relates to. Obviously a level from a weekly time frame over years would have a little more play then an intraday level on the 1hr chart so take this into consideration. What Each Variable Communicates. Although I could spend an entire treatise writing about all the things each variable above communicates, I will go over the key points here. 1) How Price Reacted To This Level In The Past – this is a big one as it tells me what the major players thought of this level. Was the pair highly overunder valued here and it produced a violent reaction in the past? If so, then the first time it comes back to this level, we can expect a strong reaction. Why? If the reaction off a level was fast, that translates into heavy buyingselling with some large player initiating the rejection. This is followed by other players quickly rushing in to get as close to that price as possible, essentially chasing for the best price, but agreeing with the initial rejection. These levels are defended with a lot of money, and if price does not come back for some time because it traveled fast and furious off this level, then the next time it gets there ( especially if it’s the first time back ), expect a strong reaction. Exhibit A – Gold Daily Chart. When gold sold off massively due to huge margin increases by the metals exchanges, it crumbled hard and everyone was wondering where the bottom was. It found it eventually at $1532 where in one day, it opened at $1640, jumped up $23, dropped $130, then bounced $96 from the lows which was quite an amazing rejection inside one day. This is a violent reaction , so traders were definitely taking notice of it the next time it approached this level. Can you guess what happened when it got there again? Second Approach Gold Chart. As you can see, price held this level with a tiny breach, then bounced the next 4 days in a row, suggesting strong follow up buying on this rejection.

The first time back usually is a slightly lesser bounce since many know of the level, and thus less traders are trapped ( or surprised ) from a violent rejection the first time around. But usually, this level will hold. Remember, this is one scenario of how price has related to it in the past. All the other types of reactions communicate a different story. 2) How Significant Is It (lower time frame, higher time frame, etc) – this really has to do with time as all support and resistance levels have what I call a ‘ time degradation ‘ to them. Simply put, traders have a memory, but they are more inclined to take recent information as more valuable then information a while ago, especially if they are short term traders. Generally, higher time frame levels will dominate and last longer than lower time frame levels. Also, when possible, I’m more interested in drawing levels that are more likely to maintain the trend as that is the more probable scenario. I particularly relate to these when reading the impulsive vs. corrective moves in the market. For more information about understanding impulsive vs. corrective moves, make sure to watch the video here. But once you have established the trend according to the impulsive vs. corrective series, look for breakout pullback level where the trend continued, or major swing highslows where the trend paused and pulled back to. These will often present great opportunities to get in with trend. 3) How Price is Reacting To It Now – Is price closing on a support level, and just sitting there, with smaller and smaller bounces off it? If so, a breakout through the level is more likely as there is no strong buyers able to push back, and the sellers continue to squeeze them out of the market. Was there a strong pin bar reversal off this level? If so, it could be telling you it will likely hold on a second attempt and start a reversal, hence look for an entry close to the level.

How price reacts to the level in the moment can tell you if it’s likely to hold or not, but this analysis should be done before it reaches the level. Often times the market will demonstrate a price action reversal signal at these levels. Keep in mind, this is the ‘ effect ‘ of how players responded to the level, not the cause. Order flow was the initial cause, and the level was the location. Everything else was a response to the initial reaction off this level. Hence these price action triggers are often ‘secondary entries’ (or sub-optimal) regarding the level. Sometimes a price action trigger, say a pin bar on a 4hr chart can be an engulfing or piercing bar on a 1hr chart. So sometimes it helps to look at a lower time frame to see what the more micro responses off this level are, or what the price action context was leading up to it. But no matter what, there will always be clues as to what the major players are doing at this level, and what the more likely scenario is. Look for impulsiveness ( strength ) off the level, or weakness ( corrective price action ) off this level for initial clues. 4) What Is The Speed Or Impulsiveness Price Is Approaching The Level – this will really tell you a great deal of information whether a level is likely to hold or not. If you are trading with trend, and with the move when it is approaching a level, how strong the move is heading into it, and what is the underlying characteristics behind the price action ( speed, acceleration , etc), will tell you what is more probable. If a level is an intraday level, or one from only a day ago, a really impulsive move is likely to break through it. If it’s a daily low or high, or a level that held for a week or longer, it will have a better chance of holding. Think of it like a moving object. Consider the size of the object in relationship to what the obstacle in its way is. Normally, force x acceleration (& mass) will tell us whether the obstacle ahead will cave or not. Unfortunately, we do not have exact information about the orders at a level, such as the number and size of them which would equate to mass and volume of the object. Level 2 quotes would help in this fashion, but if you don’t have that, then what? Why not use the other principles above, such as; - how did price react there in the past - how significant is it - how is price reacting to it on first touch.

Weigh those against the force, or impulsiveness of the move, and you’ll be able to get a better idea. A good example would be the following chart below of the AUDUSD on the daily time frame. Price approaches the level with some volatility, as there are solid moves on both sides of the fence with bears maintaining control on the way down. Price bounces off the level with a piercing pattern and then a second attempt forming a pin bar reversal. But then after a small retrace, price attacks the level with vigor, selling off 4 days in a row, taking out the last 13 days gains. Does this resonate strength to you? Do you think it will break? See the chart below. Exhibit B. As you can see, price was exhibiting a lot of strength and impulsiveness heading into the support level. There were definitely some clues ahead of time this was going to break. Such as how price barely lifted off the level each time, and attacked it twice without ever gaining much ground to the upside.

Keep in mind, the trend was already down leading up to it, so with trend traders used these pullbacks to get back in the trend. The last time they said enough is enough, and went to take out the barriers at this level. The buyers at the support level likely exhausted themselves on the first two rejections which failed to gain traction. Putting all these components together would have communicated a breakout was likely, which would have helped your current short, or give you a second opportunity to get back in on a textbook breakout pullback setup for a high probability-low risk trade. In Summary. So there you have a few key variables to look for in finding the best support and resistance levels. Remember, price action patterns form at these levels and are the ‘ effect ‘, not the cause of the move. They do communicate information to us as traders, what we are looking for is the price action context before we reach these key support and resistance levels. Hence, it is these key levels where orders are being placed first. Thus, by learning how to read the price action and the key variables I listed above, you can greatly improve your ability to spot good setups, improve your entries, placing trades where weak players are getting in, and the stronger players are looking to enter.

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