How to trade Support and Resistance
Here is a link to a brilliant thread / article about how best to trade using the support and resistance method.
http://www.forexfactory.com/showthread.php?t=206723
How to trade support and resistance
It tells you how to draw accurate support and resistance levels and how to trade support and resistance properly.
What is support and resistance?
Why do you think price has a tendency to find support and resistance at these areas in particular?
Why was price unable to retest the S/R line in the first place?
What implications might this have when price does retest this level in the future?
Where’s the buyers?
Where’s the sellers?
Where’s the value?
Where does the loser get in and where is his pain threshold?
Support and resistance can also be described as supply and demand.
A supply level is a resistance level. so if eurusd was bearish at that level it is because supply is greater than demand at that level. Sellers have waited at that area to sell because that area was a good area for selling before. Sellers see that the euro is expensive at that point compared to the dollar for example.
The euro in the euro usd pair is the commodity if you like. When sellers come in, as the price moves down the euro becomes cheaper and therefore there are more euros to the dollar.
The supply of the euro is therefore greater to the dollar at that point in time compared to what it was at the supply level when it was considered too expensive, hence the level acting as a supply level. As price moves away from the level the risk of getting in late is higher than if you had gotten in at the level. These supply and demand levels therefore offer us high probability/low risk trades compared to other signals on a chart that may be in-between supply and demand levels.
Supply/demand levels also have to considered in regards to the ‘health’ of the country’s economy. That’s what stops are for.
Vice versa for demand. Demand is support.
I make my charts after every trade I take, I post some to this and other websites and blogs in order to help other learn to trade. It also helps me to improve my trading, so not totally selfless, lol. Onwards and upwards folks, we are here to beat the brokers.
They also have a school for learning how to trade longer term charts at www.fxmonkeyschool.com.
The fx500club and fxmonkeyschool, forex trading school don’t just trade charts and indicators alone, they teach us to use correlation of the whole market before entering a trade. It truly is the best place to learn how to trade forex properly, safely and profitably. It’s all about the pips and about protecting your capital.
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