What is Support and Resistance?
Along with Fibonacci, Trend Lines, MACD, Moving Averages, Support and Resistance strategies in Forex trading is but one of the most common Forex strategies employed by newbie and professional traders alike.
Having dealt with numerous Forex experts throughout the months of trading, it appears to me that different traders would have a slightly different concept on how support and resistance is identified.
Nonetheless, the basics should be the same:
To determine the support and resistance of the market in an uptrend (and vice-versa for downtrend):
- When price moved up, and retrace, the "high" point of the market then becomes a resistance
- When the retracement is completed and the market gathered enough momentum to move up again, the "low" point then became the support
- Resistance is always on the high side of the trend, and
- Support is always on the low side of the trend.
The Forex Trading Strategies Secrets of Support and Resistance
One of the secrets of apply Support and Resistance in your Forex trading is that Support and Resistance is - in contrast to common beliefs - being developed in "Zones". These zones may be anywhere from 5 to 20 pips clusters depending on the previous statistics.
Many Forex traders failed to identify this fact and always attempt to pick pinpoint entries or exit levels. As a result, many of them have missed a lot of opportunities and risked their capital without fully understand the market.
The next time when you are about to place an entry or a stoploss on a support and resistance level... Bear in mind that you'll need to include additional buffers. Don't be afraid to enter the market sooner, or set your stoplosses further away. It could mean a heck lot of difference to your balance sheet at the end of the day!
Support and Resistance Secret #2
Support and Resistance are meant to be tested, and ultimately broken. When a support or resistance is broken, wait for the price to retrace a little and enter your position from there. Set your TP to the next corresponding support or resistance level.Yup, that's the common trading mentality and it has been successful for me thus far. But what if there's a fake break? ...Like the on in that chart below:
Some traders took their losses and moved on. Others won't accept the fact and adopted the wait-and-see approach. In this case, cutting your losses would be a wise thing to do, because you'd want to minimize your risk as much as possible.
But then? What's left after that?
You see, when there's a fake break (proven when the price closed above your support and resistance zone, there's a good chance the market will move in a reverse direction... And that's where many Forex traders failed to take advantage of...
Reverse your entry! Set your TP on the next resistance level and your SL on the low of the "fake break".
I have adopted Support and Resistance as one of my few regular Forex strategies and they have proven to be extremely effective. I hope you'll find my trading secrets as beneficial as they were (are) to me. If you found a profitable Forex trading system based on support and resistance and would like to automate it, don't forget to check out some of the tips in my Forex Software post. Happy trading!
TO read the above information i think this post is interesting for investors. The Forex Strategies is really great to get the long term profit.
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A pip A pip is the smallest unit of measure for any currency. In most currencies, this is the fifth digit, or the fourth after the decimal point; in dollars, each pip is equivalent to one-hundredth of a penny. One important exception is the Japanese Yen, in which each pip is the second unit after the decimal point, meaning each pip equals one cent.is the smallest unit of measure for any currency. In most currencies, this is the fifth digit, or the fourth after the decimal point; in dollars, each pip is equivalent to one-hundredth of a penny. One important exception is the Japanese Yen, in which each pip is the second unit after the decimal point, meaning each pip equals one cent.
ReplyDeleteA pip A pip is the smallest unit of measure for any currency. In most currencies, this is the fifth digit, or the fourth after the decimal point; in dollars, each pip is equivalent to one-hundredth of a penny. One important exception is the Japanese Yen, in which each pip is the second unit after the decimal point, meaning each pip equals one cent.is the smallest unit of measure for any currency. In most currencies, this is the fifth digit, or the fourth after the decimal point; in dollars, each pip is equivalent to one-hundredth of a penny. One important exception is the Japanese Yen, in which each pip is the second unit after the decimal point, meaning each pip equals one cent.
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