How to Trade Support and Resistance in the Forex Market
How to Trade Support and Resistance
in the Forex Market
WHAT IS SUPPORT AND RESISTANCE?
• Support and resistance are
specific levels or zones on the
trading chart, where the price
of a Forex pair (or equity,
commodity, etc.) is likely to
find opposition.
WHAT IS SUPPORT AND RESISTANCE?
• Support and resistance areas are the zones where the interests of the market players intersect.
• Imagine a simple “Tug of War” game, where two teams are pulling a rope over a mud puddle. The weaker ones lose and end up in the mud puddle.
• In our case these are the bulls and the bears fighting for dominance in the market.
Support and Resistance Levels Being Tested
SUPPORT VS RESISTANCE
• Supports are the levels which are beneath the current price, while resistances are the levels above.
• Furthermore, when price goes down through a support level and breaks it, this level becomes a new resistance and vice versa
FIND SUPPORT AND RESISTANCE LEVELS
• A potential support turns into
an actual support, when the
price conforms to its level
more than once. The same
holds true for resistances.
Price Breaks Support, Old Support Becomes Resistance
SET ENTRY/EXIT POINTS
• Setting entry and exit points on S/R levels - The right way to enter or exit a trade around Support and Resistance is to and wait for the price to interact with the level first, and analyze the price action around the levels.
HOW TO TRADE SUPPORT AND RESISTANCE?
• Price action traders tend to
confirm the signals they get
with additional trading tools
like candle patterns, chart
patterns, oscillators,
momentums, etc.
Price Breaks Important Support Level, and Closes with a Strong Bearish Candle. Momentum confirms the Breakout, which leads to lower prices. Warning that the
downtrend may be over after the breach of the upper channel line.
Trading S/R Levels
• One of the most common ways to trade key levels is simply by trying to go with the market flow after the price has shown its bias toward a support or a resistance level
Typically, The more
the level is tested, the
more reliable it is
Check Out the “IN DEPTH”
Blog Post on this Lesson