Support and Resistance
The main reason support and resistance levels are so important is because this is where the big boys from the big institutions look to trade from.
To simplify things, think of support as where the buyers wait to push price higher and resistance as where the sellers wait to push price back down.
I only ever have two levels marked on my charts at any one time. I use the daily chart to mark all my levels from, which means I’m always only looking for trades at really important areas where price has shown to react strongly in the past.
We need to focus on where to trade from first and then for the price action setups, not the other way round. It’s seemingly easy to find a nice pin bar and then look for a level it’s rejecting – but this is dangerous.
We need to be the hunters not the hunted and so waiting for price to get to these super important key levels and then the price action setups to form is the way to go.
How do I mark my levels?
Once you grasp making your support and resistance levels, it only takes seconds to get each pair set up but it does take practise and a good eye. First we start on the daily charts and look where price is currently. Then, I look to the left hand side of the chart to see where price has reacted strongly above and below current price. Marking where prices has been pushed lower from and where price has been pushes higher from.
We have to consider the wicks of the candles as they indicate where price has been rejected from, longer wicks inform us that the rejection was strong. I also consider where price has been unable to close beyond.
So once price manages to say close above a key level it then acts as support rather than resistance. We call these are called flip zones.
Below is an example on the EUR/USD daily chart and where I would put my two key levels.
Where I have marked my two levels is where price has reversed strongly from. These are the two levels I will be looking for price action setups.
Here’s another example:
Here’s another example of using the key levels to hunt for potential trades to form.
Crucial for profit – must read!
The most important thing you must learn is that trading from key levels is what makes traders profitable. You don’t see expert anglers just plonking their bait in the middle of a lake. They choose where to fish wisely, where they know the fish are waiting. It’s the same with trading. We need to go fishing where the big boys are looking to trade from. This is probably the most valuable lesson I can pass on in here and must not be ignored. We want the market to come to us, not the other way around. (For more info, join the advanced membership section).
Check out this video:
How to mark your support and resistance levels
Module 1: The Basics
- Unit 1: What is the Forex?
- Unit 2: Forex terminology
- Unit 3: Fundamentals v technical analysis
- Unit 4: What is price action?
Module 2: Market Analysis
- Unit 1: How to analyse the markets
- Unit 2: What types of trades can we use?
- Unit 3: Marking support and resistance levels
- Unit 4: Time frames/best times to trade
Module 3: Price Action Setups
- Unit 1: Price action setups introduction
- Unit 2: Pin bar
- Unit 3: Engulfing bar
- Unit 4: Inside bar
- Unit 5: Sandwich combo setup
Module 4: Chart Setup
Module 5: Trade Management
- Unit 1: Trade plan
Module 6: Trade Psychology
- Unit 1: Psychology introduction
Module 7: Continue your learning
- Unit 1: What next?