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Support and Resistance

*Important tip: Support and resistance levels on a price charts are key to your forex trading success. Price Charts contains all the necessary information for trading success if you know what you are looking for.

What Is Support and Resistance?

Support and resistance are levels on a price chart where current decline and current advance respectively are halted. Sometimes price will linger around this area before reversing. You will see how I use the daily pivot points as support and resistance in my intraday trading setup. My goal here is to help you identify these support and resistance levels and use them to your advantage. Combining support and resistance with my moving averages and MACD with settings at (40,50,20) will definitely give you an edge in the markets. Lets see an example.

Click here for clearer picture support and resistance

Look at the picture above. That is how my intraday charts are setup daily. You can see that besides the pivot points, there are areas where price could just not breakthrough. Watch what price is doing. Charts don't lie.

Identifying Support and Resistance

There are major and minor forms of support and resistance.

Major support and resistance

A major support will occur if a currency pair declines to retest a previous low. A major resistance will come into play when a currency pair is advancing to retest a previous high.

Minor support and resistance

A minor support will occur when a currency pair declines to test prior resistance or prior high. While a minor resistance will come into play when a currency pair is advancing to retest a prior low.

Profitable trades in forex will come when you focus on managing your losses. Practice taking really small losses. This is possible when you place your initial stop loss as specified in the exit strategy. See chart below for examples of major and minor support and resistance.

Click here for clearer picture major and minor support and resistance

*Important tip: Charts don't lie. Trade what you see on the charts and you should be fine. Never sell at a support zone. Never buy at a resistance zone.

Interpreting Support and Resistance

Looking at the chart above, you can clearly see that the support and resistance are specific prices rather they are zones. And most often will not be broken at a first test. That is why there is always a retest. And when a retest occurs and its not broken,then it becomes a major support or resistance zone. At major support always strive to look for your buying setups. These setups are usually low risk. In like manner always look for your selling setups at major resistance. On my daily trading, I use 15 minute chart. I always plot the daily pivot points on it as points of reference for support and resistance. It has mostly worked in my favor. See this example below.

Click here for clearer picture support and resistance

Support and Resistance Trading

How do you trade using support and resistance?
There are many traders who use only support and resistance to trade and they are making a living doing so. This is because the ability to identify where buyers and sellers are in the market cycle is what will make you money. If you are buying in an area of huge supply,that is buying after a huge advance in a currency pair, the tendency is that you will be buying at a point where there are sellers. So here is how you trade support and resistance to your advantage. Since I use pivot points as points of reference for my support and resistance, I am always looking for key buy setups in areas of pivot points. A buy setup near a pivot point after a decline will produce a buy signal. If my sell setup occurs near a pivot after a huge rally, I will be looking for a sell signal. That's it.Looking at the chart above, you can clearly see that the support and resistance are specific prices rather they are zones. . See this example below of a buy trade setup.

Click here for clearer picture support and resistance

*Important tip: Never place a trade without an initial stop loss. It will ensure your capital to remain in the trading business.

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