Strategy trade on support and resistance

Good evening traders! Today you will learn all about levels of support and resistance and their application in trade. They are the basis of almost all Forex trading strategieseven if your trading system does not use levels of support and resistance, knowledge and ability to identify them on the chart, will make you a step ahead against other traders, since the levels are perfect targets for placing take-profit and safety stop-orders. If up to this point stable you merge your deposits, going from one strategy to another, today you will start to earn on Forex. By learning to identify levels of support / resistance, not only do you get a working trading strategy, but you will understand what is behind the levels that caused the reversal and more. You may at first be difficult to build levels manually, but you can use indicator support and resistance download that will be the end of our review.

See also our rating Forex brokers with real reviews by traders.

Features trading strategies levels

Type of strategy is trading on the levels

Trading – around the clock

Any timeframe

Currency pairs – any

Recommended brokers: RoboForex, Forex4you, AMarkets

What is support and resistance?

Levels of support and resistance the Forex are one of the most powerful technical analysis tools. With levels you will be able to make predictions of the behavior of prices in the future. Levels of support / resistance (also known as levels of demand and proposal) are determined by the prices on the chart in the past, where buyers and sellers have open positions such a volume that it changed the direction of the price movement. The designation of levels of support / resistance is performed by means of horizontal lines at those points where there was a reversal of the market.

Levels of support / resistance work on all currency pairs, gold, silver, oil, stocks, stock indices, CFD contracts, cryptocurrencies, etc. they can be built on any timeframe, but it should be understood that the levels built on M5, M15 and M30 is very quickly losing its importance, while the levels on the H1, H4 and D1 remain relevant for a long time.

How to define levels of support and resistance?

To build the level of support you need to find on the chart at least two lows at the same level, where there was a price reversal, connecting them by a horizontal line. For level of resistance it is necessary to connect a horizontal line two maximum.

To build the levels of support / resistance as possible in the shadows or tails of the candles and their bodies.

Sometimes it's better to work the levels of support / resistance and areas. This is especially true for smaller timeframes where it is not possible to conduct accurate level. In this case, conduct of the zone of support / resistance with the help of the rectangles in the toolbar of the trading platform.

See also the list of brokers to trade cryptocurrency.

When support can become resistancephenomenon?

When the price breaks the support level down, and then returns back to this level, but can't hit it from the back side, and continues its downward movement, the old support level becomes the new resistance level.

When the resistance can become support?

When the price breaks the resistance level up and then returns back to this level, but can't hit it from the back side, and continues its uptrend, the old resistance level becomes new support level.

Trade on levels of support and resistance

Before starting to trade levels of support and resistance you need to find them on the graph and label the horizontal lines. Because for all traders these levels are a guideline for trade entry, then this observation can be used to trade. At the approach of price to strong level, you can expect two scenario: rebound from the level or break. The most likely option is a bounce from a level, because at this time most of the traders close their trades, record profits and open new positions, designed for a market reversal. In addition to breaking the strong level of need large volumes. Recall that this applies mostly to strong levels. However, they can be broken under the impact of important economic events.

Trade from the resistance level

If the price came close to the resistance level, and soon is expected to turn down, you can open a sell trade, putting stop loss above the resistance level.

Trade from the support level

If the price is close to support level and is soon expected to turn upward, you can open a buy trade, putting stop loss below the resistance level.

See also what Forex brokers are the most reliable.

Take profit and stop loss

Levels of support / resistance are a great guideline for setting targets to take profit. It should be put before the next level of support / resistance to take profit gets triggered before the price reaches the level unfold, that is, with a small margin. If the level is too close to the opening price of the transaction, and the take profit is too small, then such a transaction should be skipped. If on the way are several small levels, then the transaction can be closed step by step. For example, on the first level close to 50% of the transaction, on the second level 50% of the remaining positions on the third level to close everything else.

Stop loss should not be too far from level, but to put it too close to level is not worth it. Stop loss must be placed at such a distance from the level to make it use less TP in two or three times, but it does not work when the false breakout of the level.

What is a false breakout of the level?

Sometimes there are situations when the price breaks through a resistance level and then falls down, and the resistance becomes the support and the resistance remains. Such breakthroughs call about. So the deal was not broken by a stop loss, it is recommended to wait and make sure that you're not a false breakout, and only then open a deal to sell.

There are also false breakouts support level when price breaks through the level, knocking out the stop losses of traders, and then again continues its upward movement. To avoid losses, it is advisable to open long positions and wait for confirmation signal.

Indicator of levels of support and resistance for MT4

It is possible that the first time you will be difficult to build the levels on a chart, so you can be useful indicator of levels of support / resistance Strong SR. He alone builds the levels for each day. A feature of this indicator is that it can build the levels in the form of double horizontal lines with confirmation on other timeframes: D1 and W1, D1 and MN, as well as W1 and MN. Trading on it very simple. We need to wait till resistance level will approach the price and will push him down and then you can log in to the sale, holding a safety stop order above the resistance level.

For shopping, all the same. Waiting for the support level will approach the price and turns up, and then are buying with a stop loss below the level.

For normal operation indicator Strong SR need to install it twice on the chart: one will build a resistance and the other support levels. Or just install the template from the archive, it already has all the necessary settings. Also for ease of use indicator, it has a sound alert that will notify you of the price to the level.

Indicator of levels of support / resistance can be used on any timeframe, and is suitable for all strategies including scalping. The disadvantage of this indicator is that it does not preserve the old levels, has lost its relevance, so I can't check the indicator on history. Otherwise, this is a great assistant of the trader technical analysis and price forecasting.

See also a list of brokers with low spread.

Insights

So now you know what the levels of support / resistance, and how to apply them in trading. Of course, it is important to understand that not all levels are equally useful. There are strong levels that the years do not lose their importance, and there are weak levels, which are sometimes not even worth paying attention to. We should not clutter the chart a countless number of levels. Choose only high quality and beautiful levels. You also need to remember that levels of support / resistance is just a tool of technical analysis, not a ready strategy. If you would like to use it in combination with your strategy, you will get powerful trading system.

Download indicator support and resistance Strong SR

Read also the article "What is the minimum amount to start Forex trading?"