Forex for a trader
Forex strategies support and resistance

Forex strategies support and resistanceThe 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. Please make sure to comment below, and click on the like buttons to share this article ?? For those wanting to learn to trade price action, get access to the traders forum, lifetime membership & more, visit my forex price action course page here.

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. Support and Resistance Trading. Support and Resistance trading method. Lines. Levels, Strategies. What is Support and Resistance? Supply and Demand! One of the basic characteristics that determines the value of a product, commodity and even a currency, forms an important aspect when it comes to technical analysis of the forex markets. Prices in a currency pair tend to fluctuate when there is an imbalance of supply and demand. In this article, we’ll explain what supply and demand is and thus eventually illustrate the importance of trading with support and resistance and how traders can capitalize on this anomaly in order to take more effective trades. What is supply and demand? Supply is when there is an abundance of a product or when there are fewer buyers in a market. This scenario results in prices being reduced. Demand, is when there is an abundance of buyers or when the availability of the product is much lesser, which tends to raise the value of the product.

Therefore, in forex terminology, when there are a lot of sellers, the price tends to drop and when there are many buyers, the price tends to rise. Supply and demand, in trading terminology can also be referred to as support and resistance. What is support in forex? Support is nothing but a level or a zone where there are more buyers than sellers, thus forming a floor and where price tends to rise in value. Resistance, in forex is where there are more sellers thus resulting in a drop in a price. In simplistic terms, it is ideal to sell at resistance (or supply levels) and to buy at support (demand levels). Support and resistance form an important aspect of trading the forex markets. They are not constant and continue to change constantly as the market dynamics continue to change. Understanding support and resistance is an important concept in trading and it is essential for the trader to understand these concepts. Support and resistance levels can assist in various forms of trading , the most common trading systems of which are as follows: To understand any of the above, we need to first get an idea of how support and resistance levels are depicted in the charts. In the chart above, notice the highlighted areas depict support and resistance, with the red and green arrows.

Take note of the green arrows depicting the support level where price has managed to rally twice. Support & Resistance – Cheat Sheet. The following points should help the reader understand support and resistance levels in forex. Support level is usually determined as a price zone where prices usually rally when reaching that zone Resistance level is determined as the price zone where prices tend to drop upon reaching that zone Past support levels, when broken can turn to resistance and vice versa Price remembers past support and resistance levels, especially over longer periods of time Round numbers especially form support and resistance levels. These are often referred to as psychological supportresistance levels Price always comes back to test the support or resistance levels It is always best to trade the first test of support or resistance levels. In this next section let’s see how support and resistance levels help in each of the five approaches to trading and also how trading with any of these five approaches can help in improving the odds when taking into consideration the aspect of support and resistance (or supply and demand) in trading the forex markets. 1. Support and Resistance during breakouts. Trading breakouts is an approach when price tends to move within a tight range over an extended period of time. The direction of the breakout, while uncertain can help determine if there are more buyers or sellers. Or in other words, if a support or resistance level is being formed. The chart below shows how after periods of consolidation or price moving in a tight range, there was a breakout to the downside.

During the process, we notice a moment where price tried to break out to the upside but failed. Traders without an understanding of support and resistance would have seen that as a long entry, but soon would have resulted in a losing trade. The trick is to look to the market structure to the left of the chart. We notice here how past attempts to break out to the upside failed. Therefore, any attempts to the upside should be viewed with suspicion. After a while price managed to breakout to the downside. But this too should be viewed with suspicion. The trick is to trade on the retest of this breakout, which as shown in the chart depicts how the breakout level has formed resistance. From the chart, we also notice how there was an intermediate support level formed, which is where we would be looking to book profits. 2. Trading reversals with support and resistance levels. Support and resistance also helps with trading reversals. The key to trading reversals is in identifying past support and resistance levels. In the chart below we plotted a support level based on previous price action . ( ? What is Price Action tarding? ) After a brief rally, we see a downtrend being seen on the charts.

Incidentally, we see a sharp reversal from the previously identified support level. Notice how price makes a very sharp pin bar to reverse from this support level? Without the use of support and resistance, traders would have continued on with their shorts without knowing how price would have reversed when revisiting the past support level. 3. Trading pullbacks to support and resistance levels. Trading pullbacks offers an effective way to take a safe trade entry. In the following chart, we show how in a downtrend, price made several pullbacks right to previous support levels which turned to resistance. These traders would have offered a very safe trade entry with a very strong riskreward trading strategy. If you look closely you will notice how the pullbacks happen into the regions of past support levels. In the above example, we see three such instances which would have offered a great way to trade with a low risk, high probability trading strategy by simply determining the trend and the support and resistance levels. 4. Psychological support and resistance levels. Another support and resistance levels is the psychological numbers. The best illustration of this could be seen in the USDJPY where it is easier to spot as well as understand. In the USDJPY chart above, notice how price reacts to key psychological levels of 95, 100, 103 and so on? What are psychological supportresistance levels? Psychological supportresistance levels are nothing but round numbers . For example, 1.3 in EURUSD, 1.6 in GBPUSD or 100 in USDJPY and so on are considered to be psychological levels.

These levels however are not support or resistance levels, but in fact can act as either of the two. For example in the case of USDJPY, notice how the psychological level of 100 acted as resistance earlier on, which in turn became support as price managed to break above it? The psychological supportresistance levels also offer a way to trade and can be used as entry points or exit points for booking profits. 5. Trend line support and resistance levels. Support and resistance levels can also be determined with trend lines. In the following charts, we see a down slope trend line. While the trend lines tend to act as support (in case of an uptrend) and resistance (in case of a downtrend), they also depict the price zones as well. In the chart below we notice that besides the trend line acting as resistance, they also depicted horizontal supportresistance levels. Look closely at the charts and you will notice how price bounced off those levels at first contact. Pay attention to the most recent price action. To the layman, it might seem as a reversal. But for traders familiar with support and resistance, will know why price bounced off from that level, which incidentally was a strong support level. As can be seen from the above examples, support and resistance forms one of the most basic building blocks of trading. They are also referred to as supplydemand levels. By having a firm understanding of the support and resistance levels, traders would be able to improve any trading system that they currently follow.

See more about TrendLine trading here. The 7 Types of Support and Resistance You Need to Know. Markets ebb and flow; they go up, they come down and they move sideways. The primary ways we make sense of these movements are analyzing the price action as well as the levels in the market where price bounced higher or rotated lower, we call these levels support and resistance. Support and resistance levels form the foundation of technical analysis and they help us build a framework from which we can understand the market. For price action traders, support and resistance levels help us plan our stop loss placements and profit targets, but perhaps more importantly, these levels give us a way to make sense of the market in terms of what it has done, what it is doing and what it might do next. As I teach in many of my lessons, my overall trading approach can be summed up by the acronym T. L.S or Trend – Level – Signal. This lesson is primarily about the L (levels), I discuss the Trend and Signal portion of T. L.S. in other lessons, here are a couple: In this lesson, we will not just be showing you how to draw support and resistance levels, but we will delve deeper and discuss how to use these levels to find high-probability trades in range-bound markets, determine trends, define risk & targets and more. I hope you enjoy this lesson and refer back to it often, as it is jam-packed with helpful explanations and examples…

The 7 Most Important Types of Support and Resistance & How to Use Them… Traditional swing highs and lows. Perhaps the most important support and resistance levels are traditional swing highs and lows. These are levels that we find by zooming out to a longer time frame, typically the weekly chart or possibly even monthly. This is where we get a ‘bird’s eye view’ of the market and the major turning points within it. What we want to do is simply identify the obvious levels that price either reversed higher or lower at and draw horizontal lines at them. These levels do not have to be ‘exact’, they may intersect price bars or they may be zones rather than exact levels. You can consider this the first step in regards to support and resistance levels and it’s the first thing you should do when analyzing any chart. Notice the ‘bird’s eye view’ we get by zooming out to the weekly time frame. Here we can identify major support and resistance levels, trends and trading ranges… Next, we want to zoom down a time frame, to the daily chart, to ‘fine tune’ our levels some more. The daily chart is the primary time frame for finding trade setups, so it’s important we understand the broader picture on the weekly chart but also that we have identified the shorter-term levels on the daily. I have a good video on this topic of mapping the market from higher time frames to lower, be sure to check it out. One key point to remember is that when you zoom into the daily or even the 4 hour or 1 hour, you always leave the higher time frame levels on your chart as they are very important. Notice, by zooming into the daily chart from the weekly example above, some of the same weekly levels are still in play as well as some new shorter-term daily chart levels we couldn’t really see on the weekly… Stepping swing point levels in trends.

Have you heard the saying “Old support becomes new resistance and old resistance becomes new support”? This is referring to the phenomenon of a market making higher highs and higher lows or lower highs and lower lows, in an up or downtrend. We should mark these ‘stepping’ levels as they form, then when the market breaks down or up through them we can look to trade on retracements back to those levels, also known as trading pull backs. This also gives us a way to map the trend of a market – when you see this stepping phenomenon you know you have a solid trend in place. These levels are good entry points as well as points to define risk or stop loss points. You can place your stop loss on other side of these levels. For example, in the chart image below, we see a clear downtrend in place. As price broke down past the previous support level, that level ‘flipped’ to resistance levels that act as high-probability entry levels if price retraces back up to them. Swing point levels as containment and risk management. We can look to sell or buy at swing points even if they are not part of a trend. Markets spend much of their time consolidating and in trading ranges, so we should be able to find trades within those market conditions, not only in trends. We can simply use the most recent swing high or low as a risk point to define our next trade, which you can see in the chart example below. In the image below, notice that price broke lower, down through support, then it stayed contained under that level, which was then acting as resistance. We could look to sell at that level or just below if price stayed contained below it. In this way, that level is defining where we will look to take our next trade and we know if price moves beyond that level our trade idea is invalid, so placing our stop loss just beyond that level is obvious.

We can also use recent swing points as profit targets. In the example below, notice how we could use the recent swing lows as profit targets. Dynamic support and resistance levels. Next, let’s talking about dynamic support and resistance levels. What I mean by dynamic is moving levels, in other words, moving averages. A moving average moves up or down according to what price is doing, and you can set it to consider a certain number of bars or time periods. My personal favorites are the 21 and 50 period EMA or exponential moving averages. I like to use them on the daily chart time frame mostly, but they can also be useful on the weekly charts. These ema’s are good for quickly identifying the trend of the market and for joining that trend. We can watch for price to test the moving average after breaking above or below it, and then look to enter at or near that moving average. Ideally, the market will have proven itself by testing the level and bouncing previously, then you can look to enter on that second retrace. Here is an example of the 50 period EMA being used to identify a downtrend as well as find entry points within it. Ideally, we will look for a 1 hour, 4 hour or daily chart price action sell signal as price nears or hits that level on a retrace back up to it in a downtrend like this… The 21 period EMA can be used in a similar manner as we see below. Keep in mind, the shorter the EMA period the more frequently price will interact with the EMA. So, in a less volatile market you may wish to use a shorter period ema like the 21 rather than a longer one like the 50. 50% Retracement levels.

Whilst I don’t use traditional Fibonacci retracements and all their many extension levels, there is a proven phenomenon that over time, markets often hold the halfway point of a swing (circa 50 to 55% area), where market makes giant moves, retraces, then bounces in original direction. This is partly a self-fulfilling event and partly just a result of normal market dynamics. To learn more, checkout this lesson on How I Trade 50% Retracements. Look at this example chart showing a large up move that retraced approximately to the 50% level on two different occasions, providing a very high-probability entry scenario, especially on the second bounce… Trading range support and resistance levels. Trading range support and resistance levels can provide many high-probability entry opportunities for the savvy price action trader. The main idea is to first identify a trading range, which is basically just price bouncing between two parallel levels in the market, and then look for price action signals at those levels or look to fade the level on a blind entry. By fade the level, I mean if the market is moving up and at the key resistance of the range, look trade the opposite way, i. e. sell. Or, you look to buy the support of the range. You can literally do this until price clearly breaks and closes outside of the range. This is a MUCH better approach than the one most traders take in trading ranges – trying to predict the breakout before it happens and constantly getting whipsawed as price reverses back into the range. Note, in the example image below, we had a large trading range as price was clearly oscillating between resistance and support. We could have entered on the second test of resistance (short) or on the second test of support (long) either blindly or on a price action signal like the pin bar signals we see at the support below.

Event area support and resistance. The final type of support or resistance we are going to discuss today is event areas. Event areas are a proprietary form of support and resistance that I expand on in detail in my price action trading course, but, for now, let’s make sure you have a good basic understanding of them. Event areas are key levels in the market where a major price action event occurred. This can be a big reversal or clear price action signal either of which led to a strong directional move. In the example chart below, you can see a clear event level that was formed after a strong bearish reversal bar on the weekly chart (there was also a large daily chart bearish pin bar there). As price approached that level on a retrace some months later, we would have wanted to be sure to have that level on our charts as it was a strong level to look to sell at either on a blind entry or on a 1 hour, 4 hour or daily chart sell signal. I hope you have enjoyed this support and resistance tutorial. We have gone over the major types of support and resistance and how I use them as indications of market condition (trending or range bound), levels to look to buy or sell from, levels to define risk and as a framework to understand what the market has done, what it is doing and what it might do next. When you combine a solid understanding of support and resistance levels with price action and market trends, you have the triumvirate of trading: T. L.S, which you can learn much more about in my Price Action Trading Course. I WOULD LOVE TO HEAR YOUR THOUGHTS, PLEASE LEAVE A COMMENT BELOW :) Any questions or feedback? Contact me here. 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. 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! Forex Trading Strategy: The Ultimate Guide (2018 Update) Do you want to master Forex trading? Well it all starts with having the right strategy! Trading Forex using price action is simple, stress free, and highly effective. In this guide I will share my advanced Forex trading strategy with you. You will learn to use powerful price action techniques in a stress free and simple Forex trading strategy. Don’t have time to read this article right now? I will send you a ebook version that you can read offline whenever you want. Just let me know what email to send it to. Almost there! Create an account by completing the form below. Forex Price Action Strategy. The Story of Price.

Price Action Setups. Chapter 1: My Price Action Trading Strategy. My Forex trading strategy is based completely on price action, no indicators, no confusing techniques, just pure price action! What is Price Action Trading? All price movement in Forex comes from bulls (buyers) and bears (sellers). When GBPUSD moves up it’s because there are more bulls than bears and vice versa. The Forex market (and any market for that matter) is in a constant state of struggle between bulls and bears. Price action trading is about analysing who currently controls price, bulls or bears and if they are likely to stay in control. If your analysis shows that bulls are in control and that they are likely to stay in control, then you can buy (long). If it shows that bears are in control and that they are likely to stay in control, then you can sell (short). How do you analyse who’s in control of price? By using two simple price action techniques.

Support and Resistance Areas. These are buy and sell areas you can easily identify and place on your chart. Once price hits these areas you know it is likely to stall or reverse completely. This allows you to buy or sell at the right time. Advanced candlestick analysis. This is not that basic doji equals reversal stuff you may have seen elsewhere. Advanced candlestick analysis goes much deeper than that so that you have a full understanding of what a chart is telling you. Once you understand this, one glance at a chart will tell you who’s in control of price (bulls or bears) and if you should buy or sell. These two techniques make up the core of my price action trading strategy. In fact, those are the only techniques I use to find and trade high probability setups. My trading strategy differs from most courses you will come across as it is based entirely on Price Action… There are NO indicators. There are NO confusing techniques. There is NO stress. It’s simply about reading price and making smart trading decisions.

Forex Price Action Strategy. My Forex price action strategy was born in 2005 and has been constantly improved over the last 12 years – this strategy has seen it all. It has survived major market changes from the financial crisis in 2008 to the Swiss Franc disaster in 2014, to Brexit in 2016. It really has seen it all. My price action strategy works in all market conditions . From trending markets to low volatility, to ranging, to high volatility, it has weathered it all with consistent profits. Indicator based strategies work well in specific market conditions. If you have a strategy that works in low volatility markets, it will fail in high volatility, ranging, or trending market conditions. Price action adapts, indicators don’t! Price action doesn’t only adapt to changing market conditions though, it adapts to different pairs, different time frames and, crucially, to different traders. Above all, Price Action keeps your trading simple . In fact, my Forex trading strategy is so simple that you can trade it from your smartphone. I use this strategy to trade on the go – as of 2017 I take over 70% of my trades from my smartphone.

My Forex trading strategy was created with simplicity in mind. The most common downfall of today’s traders is over complicating their strategy. We have all seen charts that look like this. How can you trade comfortably using a chart like this? How can you trade efficiently using a chart like this? How can you trade from your smartphone using a chart like this? You can’t, it is too messy. The core rule of my price action strategy is to keep trading simple. Because the Forex trading strategies that work best are simple . The only thing I place on my charts is support and resistance areas . I use these support and resistance areas in conjunction with candlestick analysis to trade Forex. So what does a clean Forex chart look like? Much better than the monstrosity above! This chart is uncluttered, easy to understand and to navigate, with nothing to distract you from analysing price action.

This style of trading is quick, efficient, stress-free, and you can do it from anywhere, including your smartphone. So if you want a simple Forex strategy, keep reading. Chapter 2: Support & Resistance Areas. Support and resistance areas show you where to buy and sell, they are a vital part of every traders toolkit, and it is essential that you learn how to place them . What is Support and Resistance? Placing support and resistance areas is the most important skill you can master in trading. And placing them is easy. Support and resistance areas divide your chart up into buy and sell areas. An area that sits above current price is a sell area, any area below current price is a buy area. The terms buyers and bulls are interchangeable.

Support is a buy area as buyers are found at support. Resistance = Sell Area. The terms sellers and bears are interchangeable. Resistance is a sell area as sellers are found at resistance. On the GBPUSD chart below, you can see price is approaching the blue shaded area at 1.3500. This is a strong resistance (sell) area. When price approaches a sell area large amounts of sell orders are triggered countering buy orders. This usually results in price stalling or even turning around completely for a reversal. Why does this happen though?

It’s simple, the market movers like banks and hedge funds place their orders at areas of support and resistance. Why Do Market Movers Place Their Orders At SR? Good traders don’t randomly place entry orders and hope that they get lucky. They place their entry orders at significant price levels. Significant levels come in many forms. Yearly, monthly, weekly highs or lows. Rounded numbers such at 1.0000 and 1.0500 (also called psychological levels) All time highs or lows. Areas in which price has stalled or reversed more than once. In the GBPUSD chart example above, we can see that price has stalled at the 1.3070 twice (green highlights). The next time it approaches the level it pulls back again and then again two more times (yellow highlights). Because market movers place their buy orders at the 1.3070 and when price hits the area the buys trigger causing a reversal. This happens all the time on every Forex pair and in every financial market for that matter. This is how markets work, buy and sell orders are grouped together in the same general area and when they are hit we see the impact on price. Placing Support and Resistance Areas. There are a lot of indicators out there that claim to give you great support and resistance areas.

I have tried them all and I do not find them reliable. Support and resistance placements still need to be done by a person. These are my support and resistance areas, but if you want to trade more pairs you will need to place them yourself. A good Forex trading strategy requires some work! But don’t worry, it is easy, all you are doing is placing horizontal lines when you spot an area with two or more bounces. I am going to break it down into a step by step process for you though. But first, we need to define some rules for support and resistance areas. Three Rules to Support and Resistance. There are three key rules you need to keep in mind when placing support and resistance areas. Place areas on the body of a candle, the body is more important than the wick. The more recent the bounce the more important. Prioritise recent bounces over older bounces.

You need at least two connecting bounces to place a support and resistance area. There are a few exceptions to this, the most common one being for points which are yearly or all-time highslows. When you spot a year or all-time highlow you can place an area there even if it has only once bounce. Step By Step Guide to Placing Support and Resistance. Step 1: Select a daily chart and zoom out until you see around one year of data. Don’t worry if you see a little more or less than one year, it’s not a big deal. Step 2: Identify the highest and lowest bounces in the last year and place an area at each. Remember, place your areas at the bodies, not the wicks and as these are yearly highs and lows placing them based on a single bounce is enough. Step 3: Place support and resistance areas between the first two by connecting areas which have two or more bounces. You will generally find that there are 5-8 support and resistance areas on most charts. If you have more than 8 you probably placed too many. Chapter 3: Advanced Candlestick Analysis.

Most new traders learn a little bit about candlestick analysis. But most of what they learn is completely useless! Well the standard approach to candlestick analysis is basic pattern recognition, which fails to work in real trading. I delve much deeper than that, I look at the story behind the candle and in this chapter I will show you how to do that too. You can’t skip straight to advanced candlestick analysis without knowing some basics first. If you don’t know the basics, that’s fine, I got you covered! The Truth About Candlestick Analysis. When Forex traders first start out they usually learn about candlesticks. But what they learn is usually useless. They normally see a list of “candle patterns” like the one below. Each pattern has a set in stone definition and that is the only meaning it can have. This is not candlestick analysis, it is pattern recognition. And for a price action trader, it is useless. Actually, it is worse than useless.

Thinking about candles as just patterns is counterproductive. It makes you a worse trader, it leads you to make massive mistakes. Giving a pattern a set definition leads to tunnel vision. When you see that specific pattern, you assume that something will happen. But that is not how candlesticks work. All candlesticks need to be assessed based on the candlesticks around them, and many other factors. Below is a candlestick pattern commonly called a “spinning top”. Normally people say that a spinning top means a reversal is imminent, which can be true. However, this same pattern can also mean that a continuation is imminent. It can mean that price is temporarily stalling. It can mean a lot of different things. Thinking of candles as simple patterns is the wrong way to do things. You need to look beyond the pattern and read the story of price. Every single candle on your chart is telling you a story.

When you combine those candles together, you get the story of price. The foundation of my Forex trading strategy is reading and understanding the story of price. Reading and understanding the story of price is vital in Forex. It is vital because it allows you to answer one of the most important questions in trading… Who is in control of price? This question has three possible answers: buyers, sellers, or neither. Being able to accurately answer this question is vital. If you are about to enter a short trade and you ask yourself. “Who is in control of price?” and your answer is “buyers”, well perhaps selling is not a great idea. Let’s break down the story of price. If you look at the three highlighted candles below, it is easy to conclude that sellers are in control of price. The candles all closed lower than they opened, they all created new lows beyond the previous candles low and they all had small upper wicks in comparison to the candle body.

The small upper wicks indicate that buyers were unable to push price up by much. But what does the highlighted candle in the next chart tell us? It has a short upper wick, a small body, and a long lower wick. This is what I call an indecision candle. What’s an Indecision Candle? Indecision candles occur when neither buyers or sellers can gain and maintain control of price. They are common, but if used in the right way, they can be very powerful. Take a look at this bullish trend (yellow highlight), it is a strong trend, there are several bullish candles heading towards an area of resistance. The big bullish candles tell us that during the highlighted period buyers were in complete control of price. When price hits resistance we get an indecision candle forming (green highlight).

Let’s break this candle down into a story so you understand why it indicates indecision. Large Upper Wick (Blue Highlight) A large upper wick shows that buyers tried to continue the bullish trend but failed. Sellers took control of price and pushed it down. Small Bearish Body (Green Highlight) The small bearish body shows that sellers were able to close lower than the open. This is significant because in the three candles before this price consistently closed higher than open. This shows us that buyers are losing power. Small Lower Wick (Red Highlight) The small lower wick shows us that sellers were not able to gain much ground either. This tells us that sellers are not strong enough to turn price around completely. However, they are strong enough to stall further buyer movement. All together this indecision candle forming right after strong bullish candles suggests that power has shifted from a decidedly bullish (buyer) market to an undecided market. While sellers are not in control, neither are buyers. But there is one more thing we need to look at… … The indecision candle is forming on top of a resistance area. Let’s looks at this chart again. If you remember, in the previous chapter we talked about resistance being a sell area and support being a buy area. So the image above shows us three strong bullish candles heading into a resistance area.

And then… Price stalls and we get indecision forming on top of that area. This tells us that the sell area is working. When price pushed into that area sell orders triggered and buyers could no longer continue up. That is the story of price for this chart. And this story gives us a nice little price action trade setup. Chapter 4: Setups With My Forex Trading Strategy. Price action allows you to take many different types of trades, reversals, continuations, range, swing, breakout and scalp trades to name a few. In my free Forex trading strategy I will focus on one type of setup, the easiest to spot and trade, reversal . How to Spot a Reversal Trade. Reversals occur quite often, but if you do not know what to look for, you cannot trade them. Reversals are one of the strongest price action setups, and one of the easiest to trade. And because they occur so often, you can trade this setup exclusively and be a profitable trader.

In fact, for years Forex trading strategy focussed on reversals only. However, these days I trade more price action setups. Reversal trades come in three parts: The preceding trend. The Indecision candle(s). The reversal trend. Let’s break down each of these parts. A preceding trend is a strong move by the bearsbulls heading into an area of supportresistance. In the example above, the preceding trend is a very strong bearish move, indicating that there are a lot of bears in the market and very few bulls. If bulls were strong then price would not be trending down. The preceding trend shows


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