Forex world

November 28, 2022

How to trade support and resistance?

How to trade support and resistance in forex? Support and resistance trading strategy in a unique way and with many differences, which will be shared in this article.

I will not refer to the concept of support and resistance areas again.

However, in order to increase efficiency in price analysis and forecasting, in forex trading, you should remember a few notes below:

- Please zoom out on the price chart when analyzing support and resistance areas, it helps you to observe the market in a broader way.

- Do not attach too much importance to the absolute price, because the market always has volatile price areas with high noise. So, let's get rid of the noise levels, it will open a clearer and more reliable support or resistance area.

- Each timeframe has its own trend, so it also has its own support and resistance levels, with separate reliability.

- With the method of trading at support and resistance areas, I recommend trading at the H1 time frame and above, not trading with the smaller time frame.

- Always consider more signals of trading volume, multi-timeframe analysis, and note timing factors in trading (trading time, cycle).

A chart like the image below is a good example:

And, here are the details of how to trade with the support zone:

- When the price meets support for the first time, the possibility of it reacting and turning up is quite high. Subsequent exposures to that support level will gradually decrease the likelihood of reactivity. In other words, support has the highest role to push the price up on the first exposure, and will gradually decrease for the next time.

The image below shows us that after the price formed the support at point 1, the price met this support for the first time at point 2 and had a clear reaction, the support level 1 came into play.

- If a "virtual support" is formed near the key support level, it has almost the same effect as the key support level.

Also with the image above, the "virtual support" level is formed at point 3, and the price is continuously touching this support level. Finally, at point 4 the price plummeted and broke this support.

You understand, the main support level is point 1, and after many times the price touches this support level, it will happen to break it.

And if you're looking for a support zone to buy, buy only at point 2, where price makes first contact with support, and it's the most reliable.

- If you buy in an uptrend, the accuracy is the highest, the probability of winning is the highest.

- If you buy in a sideways market, the reliability is also quite good.

- If you buy in a downtrend, the probability of winning is lower.

- The stop loss of this trading method is quite short, the R:R ratio is very optimal.

- You can place a pending Buy Limit order at the support area, after it is established, without the price touching it once, if you do not have time to monitor the market.

- If following the market, at the target price area, you are looking for a buy point, switch to a smaller time frame, look for a double bottom, or a head and shoulders reversal pattern, or a pinbar candle price increase, you can find the ideal buying point.

- The take profit point of this method is at least 50% of the wave's fluctuation range, from the support area (where you entered the order) to the nearest resistance area.

- If the price moves correctly, you can completely apply the move stop loss method, to maximize profits, according to the method shared here: move-stop-loss.html.

*** Trading with resistance is the exact opposite of the above.

Thank you for reading and sharing this article.

Best regards,

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