Posted by forex at 1:19 AM
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1. View a long-term chart to identify past support and resistance levels. The chart you use will vary depending on your trading style. If you're an intraday trader, you might use the hourly chart, and you might use a 4 hour chart if you are a swing trader. If you are a trader who holds positions for longer periods of time, you might use the daily or even weekly chart.Once you've selected a chart to use, scan the chart for levels where price reversed or stalled. Mark these levels down as important support and resistance levels. The easiest way to do this is to simply plot a horizontal line on the chart at the appropriate price level.
2. Monitor price as it reaches an established support or resistance level. These past levels are candidates for futures reversals and rallies. The idea behind this concept is that history repeats itself. Since many Forex traders acknowledge support and resistance levels, this concept may also incorporate elements such as self-fulfilling prophecy and unified market sentiment. Simply put, if enough market participants view a price level as significant, this often translates into tangible price action in the market.
3. Always try to identify and trade with the trend. The trend is simply the general direction of a Forex market at a given time. For example, if you are an intraday trader and you see that the hourly Forex chart is steadily making higher highs and higher lows, this means that the trend is up. In this scenario, you should look exclusively or at least primarily for buying opportunities in the chart you trade from. Buying opportunities arise when there is a small pullback within the context of a general up trend.