How To Identify Support and Resistance
In today forex faq, we have a question regarding support and resistance levels.
Below is the question:
Support and Resistance seem a very important part of trading – but what is the best way to find relevant levels?
You are right to say that support and resistance are important part of trading as the price moves according to them.
Therefore being able to identify areas of strong support and resistance can be a great help to a trader. In this post, I shall be showing you how to identify strong support and resistance.
First of all, let me list down the various types of support and resistance that you have to take note.
Pivot Point – The pivot point indicator is one of the common indicator that is used by professional traders. Therefore you will see the price respecting the pivot levels very often.
You can plot various pivot levels like the daily, weekly or even monthly on the same chart. If you manage to find levels where several of the pivot points coincide, this will be a level of strong support and resistance where you can for entry and exit.
Fibonacci Level – The fibonacci indicator is another great indicator used to find support and resistance. Personally I only use the 0.382, 0.500 and 0.618 fibonacci retracement as these are levels that I find the price respond more to.
Similar if you are able to draw multiple fibonacci levels and you manage to find places where various fibonacci levels overlap, you can use that level for entry or exit as there is a higher chance of the price getting repelled by it.
Bollinger Bands – If you have watched my video tutorial on bollinger bands explained, you will know that the upper and lower band of this indicator serves as a level of strong support and resistance.
The above are the few effective support and resistance levels that you have to learn to identify. You can visit the blog posts that I have written individually for pivot point, fibonacci as well as bollinger band to have a better understanding of the above indicators.
If you guys have anything to share, do feel free to give your comments below.