Support and resistance 1

Support and Resistance Indicator For Forex Trading

In this post, I am going to share with several indicators that can serves as a strong level of support and resistance for your trading. Some of you may be wondering what is the purpose of finding support and resistance when you are trading. If you take a look at your forex chart, you will […]

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    In this post, I am going to share with several indicators that can serves as a strong level of support and resistance for your trading. Some of you may be wondering what is the purpose of finding support and resistance when you are trading.

    If you take a look at your forex chart, you will find that the price are always moving in waves form. This is because the price are being repelled and attracted by levels of support and resistance.

    Support and resistance 1

    These levels act like magnets, they tend to repel price when it first touches it. At the same time, it will also attract price to move towards it when they are distance away.

    If you have been reading up on forex books, you should have heard of past support turns resistance or past resistance turns support. For those of you who are new to trading, I will take this opportunity to tell you more here.

    Most of the time, you will find that the price tends to come back to retest the trend line or S&R levels that it has broke. This is because the support level that is broken will immediately turns into a new resistance level.

    new and old support

    Before the price continues to move in the direction of the breakout, it will most probably comes back to test the new resistance. If it is successful, the new resistance will repel the price and the market will then move in the direction of the breakout.

    Therefore as a trader, it is very important for us to be able to identify levels of strong support and resistance. These levels can serve as a good entry or exit point for us.

    In this post, I shall be sharing with you several forex support and resistance indicators that you can use in your trading

    1) Fibonacci - This is one indicator that is commonly used by those institution traders and therefore the levels that is provided by this indicator are often seen as strong levels.

    To see how to draw the Fibonacci levels, you can take a look at this post that I have written

    Not all retracement levels are considered strong levels, from my trading experience, I only see the 0.382, 0.500 and 0.618 as strong levels that will repelled the price.

    Forex Fibonacci

    2) Pivot - The pivot point is another indicator that is commonly used by those institution traders as well. Similar to the Fibonacci indicator, the pivot point serves as a strong level of S&R.

    There are some trading platform that can plot the pivot points automatically for you. For those of you who are using MT4 platform, you may have to calculate the pivot level yourself.

    Below are the steps to calculating your own pivot levels

    Step 1: Head to http://www.fxstreet.com/forex-tools/pivot-point-calculator/

    Calculator

    Step 2: Take the open value of the candle on the 0000hr of the previous day

    Step 3: From the 0000hr of the previous day to the 0000hr of today, note down the lowest value the market has hit and the highest value the market has hit.

    Chart Analysis

    Step 4: Enter the data into the Pair 1 box and click on calculate and the software will calculate the pivot levels for you.

    Pivot Level

    What you do is then add the pivot level yourself using the horizontal line drawing tools on your platform.

    3) Bollinger Bands - This is an indicator that is made up of an upper band and a lower band. The upper band serves as a strong level of resistance while the lower band serves as a strong level of support.

    Bollinger Bands

    If you plot this indicator on your trading chart, you will find that the price will tend to be repelled by these 2 levels. To find out more about how to use this bollinger bands indicator, you can read the post below.

    4) Exponential Moving Average - Not all EMAs are considered strong S&R, from my own experience, the 200 EMA is one of the best S&R level for traders. I will plot this indicator on all my trading chart as it serves as a very strong S&R level.

    200 EMA

    From the picture above, you can see that the price often get repelled by this indicator and this shows that this is a strong S&R levels.

    The above are 4 support and resistance indicators that I used in my forex trading. I hope that you guys find them useful for you and do feel free to give your comments below.

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