Wednesday, June 28, 2017

Forex Support and Resistance Trading

July 2, 2013 by  
Filed under Forex FAQ & Latest Post


In the forex faq today, we have a question from one of our fellow traders asking me where to plot the major support and resistance levels as well as how to know whether the price will break through a particulate level of S&R.

Below is the question:

Hello, Can I know which are the support and resistance levels to set exactly (mainly price levels, price zone and target price) without fibo levels.

Then how do I know whether the price will break OR penetrate the area in what time.

thanks

Besides the Fibonacci levels, you can also plot the major support and resistance levels using the pivot points. For me, I will plot the daily pivot on all my charts to identify those key levels that can repelled the price.

Another good support and resistance level is the 200 Exponential moving average. This indicator itself is a strong level of support and resistance. Try plotting it on any one of your chart and you can see that the price usually get repelled by it. If the price manages to break through it, it will usually make a sharp movement in the direction of the breakout.

As for your second question on how to know if the price will penetrate of get repel by a particulate level. I can only tell you from my own experience that the price usually don’t break through a strong level of S&R when it first hit that level. It will only break through it after a few rounds of testing.

Therefore I often trade the repulsion of strong S&R level when the price first hits that level. I will only trade the breakout after several rounds of testing the same level.

I hope that I have answered your question and do feel free to give your comment below as it will be very helpful for other traders here reading this post.

Comments

2 Responses to “Forex Support and Resistance Trading”
  1. kevin says:

    What I would do is, is look at the bar on the pivot or 200. For a bounce down I would look for a bear bar, I look especially for two types of bear bars & trade the break of them. I might use an indicator or two to just to be sure.

    I have never done trading this way, but I am going to look into it. Thinking of using the M15, H1 & Daily charts to see which might be best.

  2. Warwick Sitana says:

    For long term trend trading, I find the longer price remains in a channel (R/S), the more likely & stronger the break out will be either bull or bear direction. And I draw in S/R levels myself. See below 1D chart for AUDUSD, note how it had been trending in this channel for since Oct 2012 & finally broke through the 1.02997 resistance on 1 May 2013, boom see how much it fell & still falling! Some serious coins to be made. All the best. Warwick

    (Sorry, you have to look up the chart 1 Day chart yourself for the AUDUSD pair between Oct 2012 till present, tried to paste the image but this website will not allow – Kelvin may be you could solve this?)

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