Trading Support and Resistance in Forex explained by professional Forex trading experts the “Trading Support and Resistance in Forex” FX trading team.
Trading Support and Resistance in Forex?
This is the second piece of the How to trade Support and Resistance. In the first article, we established the benefits of support and resistance and how it can provide clues to us about the market supply and market demand of the currency pair. Today’s article will show you how you can use the levels of support and resistance to determine market direction and time your entries.
Today we are going to draw trend lines on the chart. The first thing to remember is that drawing the lines is more of an art than a science. Where you draw the trend line may not be the exact place where I draw the trend line. To determine where the line gets placed, look for 2 common points within a chart.
Here is a daily chart for the AUDUSD. I’m simply connecting the 2 low points at the green circles. An effective support trend line (up trend line) is effective when it is placed on the lows of wicks of the candles. After drawing the line, I now have 2 pieces of information to help me in my trade.
*Since the trend line is sloping upward, my trend direction is upward
*Use this trend line to generate buy signals into this pair
In an uptrend, once the trend line is established, a new long position can be taken when price action trades down to support and respects the support so that a candle body does not close below it. Once prices have touched the support and the candle has closed above it, we have a valid buy signal.
Determining Sell Signals
Here is a daily chart for the USDCHF. Connect the common swing highs (pink circles) to form a resistance trend line. In this case, prices have just touched the resistance line for the 4th time. The more times a line is touched, the weaker it becomes so the best time to trade trend lines is on the 3rd and 4th touch of the lines.
Trading Support and Resistance in Forex Conclusion
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