Posted by forex at 6:21 AM
Read our previous post
1. Find the support and resistance points. The most important areas for forex traders are the pivot points. These are areas of congestion based off of the opening, close and high-low prices of the previous day that many professional traders look at. You can find these by using a free pivot calculator available online. Some forex trading software programs offer a free plug-in indicator that will plot them on your chart.
2. Another way to find support and resistance is to use the line tool in your trading software. You want to draw horizontal lines above the points of congestion from where the market is trading now. Likewise, to find support you will draw horizontal lines across areas of congestion below points of congestion. Again, free plug-in downloads are available that will draw support and resistance for you.
3. Use support and resistance areas as entry and exit points. When considering an entry, you can enter the market after it has cleared a support or resistance area. For example, if you are looking to buy a position make sure that the price 'closes' above the resistance area. If it only penetrates it, then it doesn't count. The resistance then becomes support and you can set your stop just 10 to 15 pips below it.
4. Short the market when the price 'closes' below a support area. Again, when the price closes below the support area it becomes resistance and you could set a stop 10 to 15 pips above that point.