Here are a few handy trading tips about using support and resistance in Forex trading. Technical analysis does not always have to be complicated, sometimes a forex chart and a sharp look are enough to price a currency pair well.
Support and resistance at forex
Support and resistance forex trading tip 1
The greater the speed of the rate was before the support/resistance was reached, the more significant that support/resistance level is.
This is obvious. If the share price tumbles down at a rapid pace and then is brought to a halt, says more than when he slowly trundles down, slowly … slowly …. even slower … stop.
Support and resistance forex trading tip 2
The more often a support/resistance has withstood an attack, the stronger it gets.
This is also the most important hint that currency trader get on the importance of a specific resistance/support. When a support is reversed the rate for three times already, you and a few million other Forex traders know that that is likely to happen again. This often generates perfect trading opportunities.
Support and resistance forex trading tip 3
The greater the time period of the forex chart to see which the resistance/support is, the more reliable this is.
As said, there are support and resistance levels on a 5 min chart, only are these less significant (unless they run together with levels on forex charts of larger time periods). This does not mean that they are not very useful (and profitable). If you want to keep a position open for max 2 hours and have a profit target by 30 pips, forex support and resistance levels on a 5 min chart tell you exactly what you need to know.
Support and resistance forex trading tip 4
The more time has elapsed between the last time a support/resistance level is attacked, the less significant that support/resistance level. Time here is somewhat relative, because the significance is declining much faster on a 5 min chart forex chart than on a 1 week. The thought here is that a support/resistance level is less important as the longer ago is that the traders who trade on the chart where the support/resistance level, have been in contact with that level.
Support and resistance forex trading tip 5
Searching for support and resistance levels is not too complicated. But if you can spot them unaided on the forex chart that is central to the set-up that you used, it’s probably a support/resistance that have little impact.