Tuesday, September 19, 2017

The Importance of Support & Resistance

April 29, 2014 by  
Filed under Forex FAQ & Latest Post

In today forex FAQ, we have a question from one of our fellow traders asking me the importance of S&R in trading.

Below is the question:

Hello Kelvin

I will like to thank you for this forex blog as it has given me more confidence in trading after reading through it.

However I have a question for you. Do you think that we as trader must be able to identify levels of support and resistance in order to trade more accurately.

This is a great question and if you are a student of my Forex Street University Course, you will know that all my strategies has a way to identify support and resistance to help you in your entry.

Therefore this alone shows how much I emphasize on S&R levels in my trading. This is because the forex market moves due to repulsion of support and resistance and this is what makes up the wave movement of the market.

Let me take a recent example to illustrate the importance of support and resistance level.

From the picture below, you can see a trend line that I have drawn on the chart.

trendline support

The trend itself makes a good support but trading based on trend line itself is not enough, you will need to be able to identify other levels of support that can give you more assurance for the trade.

From the picture below, you can see that I drew a Fibonacci level and the 0.618 Fibonacci level actually coincide with the trend line and this is what I often called Confluence of events.

fib support

From the picture below, you can see that the price is also being supported by the middle line of the bollinger bands and this gives us additional force at that level.

bb support

you see that the price has been repelled 36 pips upwards so far. 36 pips can be a great profits too.

I hope that I have illustrated the importance of making use of support and resistance in your trading and have answered your question completely.

For those of you who has something to share, do feel free to give your view by commenting below.

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