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Support and Resistance

TOMMY XAU | BASIC MARKET STRUCTURE Good afternoon gold gang! Thought id jump on here to talk to you about basic market structure, as its the basis for any strategy and super important to learn. We can identify that the market moves 3 ways .. up trend down trend sideways (consolidation) I prefer to trade when the market is trending in either direction. I determine this by looking at the monthly and weekly candles. In a trending market, i am looking to identify areas that the market can reverse from. If we are making a higher high for example .. I can identify that price is likely to pull back down to the key level it started its ascent from. From there i can wait for confirmations on the lower time frame to take a trade in the direction of the trend. obviously this doesnt work everytime .. news etc .. but its always good to have it in the back of your mind the phase of the market you are currently in. you will find with my strategy .. that price will make new structure points around my key levels ( the ones i place on my chart) Hope this helps some of you out .. back to basics is sometimes the way to go if you are getting overwhelmed with information Have a great sunday and see you tonight for the outlook tommy
OANDA:XAUUSDEducation
by tommyXAU
2
Visualizing Stochastic energy for perfect entriesThe stochastic RSI has always been a problem tool for me because of its clunky look erratic lines and the way it seems l....r each other and sometimes it doesn't. I've always felt like the stochastic RSI had these energy waves built into it that we weren't able to see because if there's an uptrend of the stochastic then there has to be an equal or greater downtrend of energy pushing it in the other direction but what if there isn't more than that energy and what if this is a perfect balance between the two energies. This would imply that either that there's a divergence of the energy related to how price is closing or there is a pause in the energy because they're balanced between the two and of course that means your price will pause and run flat as well. In this video I talk about the proper way to use this new indicator and the way you used to use the stochastic RSI. Using the information as video and the images that I plot out on the screen you'll be able to see when you should do you should enter trades long or short and why you need to know where your support and resistance lines are as well as whether you're breaking above or below your moving averages. Let this video be a first class tutorial on perfect trades using a stochastic RSI but like all other indicators you cannot use it by itself make sure that you have confluence on your price chart. PS as always welcome to the coffee shop.
Education
by CoffeeshopCrypto
13
Unlocking Profitable Forex Trading Forex trading can be a complex and risky endeavor, but with a well-defined trading plan based on trend and key levels analysis, traders can gain a competitive edge. In this article, we will explore a real-life example of a forex trading plan that leverages these two powerful strategies to maximize profitability. Understanding Trend Analysis: Trend analysis involves studying price movements over a specific period to identify and capitalize on market trends. By analyzing the direction, duration, and strength of trends, traders can make informed decisions and align their trading strategies accordingly. Leveraging Key Levels Analysis: Key levels refer to significant price levels on a chart that tend to act as barriers or magnets for price movement. These levels can include support and resistance levels, Fibonacci retracements, pivot points, and psychological round numbers. Real Example: A Forex Trading Plan: 1️⃣ Identify the Trend: Begin by analyzing the higher timeframes (daily, weekly) to determine the overall trend. Use trend indicators like moving averages or trendlines for confirmation. 2️⃣ Zoom Into Lower Timeframes: Switch to lower timeframes (4-hour, 1-hour) to identify potential entry points in the direction of the established trend. 3️⃣ Spot Key Levels: Locate key levels such as support and resistance zones, Fibonacci retracements, or psychological levels that align with the trend identified in the higher timeframes. 4️⃣ Analyze Candlestick Patterns: Look for bullish or bearish candlestick patterns that confirm a potential reversal or continuation of the trend at key levels. Popular patterns include doji, engulfing, and hammer. 5️⃣ Plan Entry and Exit Points: Once a high-probability setup is identified, determine precise entry and exit points, factoring in risk-reward ratios. Utilize stop-loss orders to protect against unexpected price reversals. 6️⃣ Set Risk Management Parameters: Determine the risk tolerance and position size based on the trading account balance. Implement sound risk management practices, such as using trailing stops or adjusting stop-loss levels as the trade progresses. 7️⃣ Monitor and Adjust: Continuously monitor the trade, adjusting stop-loss levels or taking partial profits as the price reaches predetermined levels. Adapt to changing market conditions if necessary. 8️⃣ Learn from Experience: Review past trades to identify strengths and weaknesses. Learn from unsuccessful trades to improve the trading plan and identify areas of improvement. Conclusion: Creating a forex trading plan based on trend and key levels analysis provides a structured approach to the dynamic world of forex trading, enhancing the chances of profitable trades. By incorporating this strategy into your trading arsenal and continually refining it based on real-life experience, you can become a more successful and profitable forex trader. Remember to stay disciplined and adhere to your plan at all times. Hey traders, let me know what subject do you want to dive in in the next post?
OANDA:XAUUSDEducation
by TopTradingSignals
13
3 Best Market Trading Opportunities to Maximize Profit Potential Hey traders, In the today's article, we will discuss 3 types of incredibly accurate setups that you can apply for trading financial markets. 1. Trend Line Breakout and Retest The first setup is a classic trend line breakout. Please, note that such a setup will be accurate if the trend line is based on at least 3 consequent bullish or bearish moves. If the market bounces from a trend line, it is a vertical support. If the market drops from a trend line, it is a vertical resistance. The breakout of the trend line - vertical support is a candle close below that. After a breakout, it turns into a safe point to sell the market from. The breakout of the trend line - vertical resistance is a candle close above that. After a breakout, it turns into a safe point to buy the market from. Take a look at the example. On GBPJPY, the market was growing steadily, respecting a rising trend line that was a vertical support. A candle close below that confirmed its bearish violation. It turned into a vertical resistance. Its retest was a perfect point to sell the market from. 2. Horizontal Structure Breakout and Retest The second setup is a breakout of a horizontal key level. The breakout of a horizontal support and a candle close below that is a strong bearish signal. After a breakout, a support turns into a resistance. Its retest is a safe point to sell the market from. The breakout of a horizontal resistance and a candle close above that is a strong bullish signal. After a breakout, a resistance turns into a support. Its retest if a safe point to buy the market from. Here is the example. WTI Crude Oil broke a key daily structure resistance. A candle close above confirmed the violation. After a breakout, the broken resistance turned into a support. Its test was a perfect point to buy the market from. 3. Buying / Selling the Market After Pullbacks The third option is to trade the market after pullbacks. However, remember that the market should be strictly in a trend. In a bullish trend, the market corrects itself after it sets new higher highs. The higher lows usually respect the rising trend lines. Buying the market from such a trend line, you open a safe trend-following trade. In a bearish trend, after the price sets lower lows, the correctional movements initiate. The lower highs quite often respect the falling trend lines. Selling the market from such a trend line, you open a safe trend-following trade. On the chart above, we can see EURAUD pair trading in a bullish trend. After the price sets new highs, it retraces to a rising trend line. Once the trend line is reached, trend-following movements initiate. What I like about these 3 setups is the fact that they work on every market and on every time frame. So no matter what you trade and what is your trading style, you can apply them for making nice profits. Good luck!
OANDA:XAUUSDEducation
by VasilyTrader
34
Finding Bottoms Using Monthly Inside Candles: DKNGNow, let's take a look at $DKNG. One of my highest conviction trades this year in January. In this case, we traded within its March '20 monthly inside range. pbs.twimg.com DKNG We zoom in to see not only did the monthly inside low hold, but we have a massive bull flag breakout. Add the fact that Massachusetts had an inevitable sports betting approval coming, this became a no brainer A+ setup. Given at $13-$14. pbs.twimg.com We capitalized on NASDAQ:DKNG , then rolling it up to a 3/17 22.5c with our target of what? The March '20 monthly inside resistance of $19.50. We sold near the top of its first wave into $21, now providing a 50%+ move on underlying since adding to WL in January. pbs.twimg.com After a pullback, NASDAQ:DKNG reclaimed the breakout of its March '20 inside range $19.50, providing another massive move into $30+ (+50%). From the time of my WL add in January, this has now provided over 110% upside. See how breaks of monthly inside ranges provide large moves? pbs.twimg.com
NASDAQ:DKNGEducation
by DKingTrades
📊 Navigating The Trading Range📌What Is a Trading Range? A trading range is a period during which an asset consistently fluctuates between high and low prices. The upper limit of the range acts as a resistance level, meaning it tends to hinder further price increases. The lower limit of the range serves as a support level, providing a barrier against significant price declines. When an asset breaks through or falls below its trading range, it usually means there is momentum (positive or negative) building. A breakout occurs when the price of a security breaks above a trading range, while a breakdown happens when the price falls below a trading range. Typically, breakouts and breakdowns are more reliable when they are accompanied by a large volume, which suggests widespread participation by traders and investors. Many investors look at the duration of a trading range. Large trending moves often follow extended range-bound periods. 📌Support and Resistance If an asset is in a well-established trading range, traders can buy when the price approaches its support and sell when it reaches the level of resistance only if there is confluence and signs for it. Using volume is a good indication of spotting continuation or reversals. If the price is approaching a support level with high sell-side volume, its a good indication it might just break down and continue the downtrend to the next support zone. You can define major support/resistance zones where there was clear reaction in the past and use them as major pivots to guarantee safer entries. Always remember two key things about S/R. The first is, the more times a S/R zone is tested the higher the change a breakout/breakdown will occur. Once a S/R breaks, it will automatically turn into the opposite of what it was, the price break out of the resistance and range above. That previous resistance will act as a support level next time the price action touches it. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
6
Finding Bottoms Using Monthly Inside Candles: SNOWThis past year, I shared many bottoms on names on my weekly WLs based on bottoming consolidation structures, mentioning a specific strategy as a reasoning for the trades. Aside from understanding price action, I used a simple method: Monthly inside candles/bars. ---------------------------------------------- What is an inside candle/bar? Inside candles trade “inside” its previous candle. The previous candle’s high and low can be used as resistance and support, respectively. Your trade execution comes on a break & hold above/below the range. Here are a few examples of this: pbs.twimg.com ---------------------------------------------- NYSE:SNOW This has traded within it’s May ‘22 inside range for over a year. This has been one of my top watches earlier this year. The range provides a macro resistance/support of $187.23 and $112.10, respectively. These levels can now be used as targets for your trades. How do I execute on this? Zoom into LTFs to find swing opportunities. In my 1/23/23 weekly watchlist, I provided NYSE:SNOW based on a previous bull div + key support/demand being held (red box). pbs.twimg.com All swing contracts provided on the WL printed, while NYSE:SNOW saw a massive upside move from $140 into $178.70 within 2 weeks. You’ll also notice my invalidation for this was $133.10 while the low was $134.34. This invalidation was based on a breakdown of the range low. Now once again, on 3/31/2023 I mentioned NYSE:SNOW as a potential high R:R trade. Based on the exact same reasoning as my January WL. Once again, NYSE:SNOW was able to hold its demand zone with a macro target of the monthly inside candle resistance. NYSE:SNOW The same exact entry & same exact analysis now provided a recent move into my $187.23 target. First move providing a 33% move, second providing a 42% move. This is how you take advantage of macro inside ranges (specifically monthly candles in these examples). pbs.twimg.com
NYSE:SNOWEducation
by DKingTrades
Learn 4 Proven Methods of Applying Moving Average Indicator Hey traders, The moving average is one of the most popular technical indicators. It is applied in stocks/forex/crypto trading and proved its high level of efficiency. There are hundreds of trading strategies based on MA. In this post, we will discuss the 4 most popular ways to apply the moving average. 1️⃣The first method is applied to identify the market trend. While the price keeps trading above the MA, one considers the trend to be bullish and looks for buying opportunities. Once the price starts trading below the MA, the trend is considered to be bearish and a trader is looking for shorting opportunities. In the example above, Moving Average is applied for showing the identification of the market trend. Its upward climb signifies that the market is trading in a strong bullish trend. 2️⃣The second method applies the combination of 2 MA's: preferably a long-term one and a short-term one. The point is that once a short-term moving average crosses above a long-term MA, with high probability, it signifies the initiation of a bullish trend. Alternatively, a crossover of short-term and long-term MA's to the downside indicates a start of a bearish trend. In the example above, there are 2 Moving Averages: short term and long term ones. Their cross signifies the bullish trend violation and initiation of a bearish trend. 3️⃣The third method applies MA as a structure. While the moving average is lying above the price, it is considered to be a dynamic resistance. Staying below the price, it serves as a strong dynamic support. Perceiving MA as the structure, one applies that for trade entries. In the picture above, Moving Average is applied as support on GBPJPY and the price starts growing after its test. 4️⃣The fourth method is aimed to track the crossover of the moving average and the price. The idea is that a bullish violation of the MA by the price gives an early signal for a possible trend reversal. While a bearish breakout of the MA by the market indicates a highly probable bullish trend violation. In the example above, the crossover of the moving average and the price is a perfect indicator of coming bullish and bearish movements. Backtest different MA's inputs and learn to apply that for predicting the future direction of the market and for trading it. Let me know, traders, what do you want to learn in the next educational post?
OANDA:XAUUSDEducation
by VasilyTrader
13
NVDA - The Million $ Question - when to sell a stockInvesting in stocks can be an exciting and rewarding endeavor, especially when you own a stock that has been on a remarkable run. NVDA is one in my portfolio that has me asking, when do I sell a stock that has experienced significant gains?? This questions is just as crucial as identifying a promising investment. Some things I look at….. Reassess the Fundamentals: Before deciding to sell a stock, it's important to reassess the underlying fundamentals of the company. Evaluate factors such as earnings growth, revenue trends, profit margins, competitive landscape, and any recent news or events that may impact the company's future prospects. If the fundamentals of the company have deteriorated or if there are signs of potential challenges ahead, it may be a signal to consider selling. Set Clear Profit Targets: Establishing clear profit targets before investing can help guide your decision-making process. Determine a reasonable level of return you expect from the stock and sell a portion or all of your holdings when the stock reaches that target. This approach allows you to lock in profits and protect your investment while still allowing room for potential upside. Monitor Technical Indicators: Utilizing technical analysis can provide insights into the stock's price trends and potential turning points. Keep an eye on indicators such as moving averages, trend lines, and support/resistance levels. If the stock shows signs of a weakening trend, breaches critical support levels, or exhibits overbought conditions based on indicators like the Relative Strength Index (RSI), it may be an indication that it's time to consider selling. Consider Valuation Metrics: Valuation metrics can help determine whether a stock is overvalued or undervalued relative to its peers or historical averages. Ratios such as the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and price-to-book (P/B) ratio can provide insights into the stock's valuation. If the stock appears significantly overvalued based on these metrics, it might be prudent to consider selling. Assess Risk-Reward Ratio: Evaluate the risk-reward ratio of the stock at its current price level. Consider the potential upside versus the downside risk. If the stock has already made substantial gains and the potential for further appreciation seems limited compared to the downside risk, it might be a signal to sell and lock in profits. Regularly Review Your Portfolio: Regular portfolio reviews are crucial for maintaining a well-balanced and optimized investment portfolio. Allocate time to assess each holding's performance, reassess your investment goals, and consider whether any changes in your financial situation or market conditions warrant adjusting your holdings. Selling a stock that has been on a run can free up capital for other investment opportunities that offer better prospects. Stick to Your Investment Strategy: Having a well-defined investment strategy is essential for successful investing. Whether you follow a growth, value, or dividend-focused strategy, it's important to stay true to your approach. If the stock's price run has deviated from your initial investment thesis or if it no longer aligns with your strategy, it may be a signal to sell. Selling a stock that has experienced significant gains requires careful evaluation and consideration. By reassessing the fundamentals, setting profit targets, monitoring technical indicators, considering valuation metrics, assessing risk-reward ratios, regularly reviewing your portfolio, and sticking to your investment strategy, you can make informed decisions about when to sell. Remember that selling a stock does not always mean you must sell all of your holdings; partial profit-taking can be a prudent strategy as well. Ultimately, striking a balance between maximizing gains and managing risk is key to successful long-term investing. As far as NVDA and my portfolio?? I have no idea how high it will go (no-one does), but I do believe it is overbought based on the technicals I use to evaluate my portfolio, so I reduced my position and tightened up my trailing stop on the remaining shares. What do you think?
NASDAQ:NVDAEducation
by MN_Coop
Learn this price action setup for the BIGGEST DAY TRADESI walk through the pre-market prep and the price action that led to a big move on the Nikkei Index. Learning price action means understanding 'WHO' may be trapped and where they will start to feel the pain and be forced to act and potentially close positions....that is when we want to initial a position to take advantage of the move. The Nikkei index was a great example of knowing when and where to trade which could have led to a big payouts. ** If you like the content then take a look at my WEBSITE in the profile to get more daily ideas and learning material ** ** Comments and likes are greatly appreciated. **
OSE:NK2251!Education
by TradeTheStructure
Learn Why You Should Study Multiple Time Frame Analysis In my daily posts, I quite frequently use multiple time frame analysis. If you want to enhance your predictions and make more accurate decisions, this is the technique you need to master. In the today's post, we will discuss the crucial importance of multiple time frames analysis in trading the financial markets. 1️⃣ Trading on a single time frame, you may miss the important key levels that can be recognized on other time frames. Take a look at the chart above. Analyzing a daily time frame, we can spot a confirmed bullish breakout of a key daily resistance. That looks like a perfect buying opportunity. However, a weekly time frame analysis changes the entire picture, just a little bit above the daily resistance, there is a solid weekly resistance. From such a perspective, buying GBPUSD looks very risky. 2️⃣ The market trend on higher and lower time frames can be absolutely different. In the example above, Gold is trading in a bullish trend on a 4h time frame. It may appear for a newbie trader that buyers are dominating on the market. While a daily time frame analysis shows a completely different picture: the trend on a daily is bearish, and a bullish movement on a 4H is simply a local correctional move. 3️⃣ It may appear that the market has a big growth potential on one time frame while being heavily over-extended on other time frames. Take a look at GBPJPY: on a weekly time frame, the market is trading in a strong bullish trend. Checking a daily time frame, however, we can see that the bullish momentum is weakening: the double top pattern is formed and the market is consolidating. The sentiment is even changing to a bearish once we analyze a 4H time frame. We can spot a rising wedge pattern there and its support breakout - very bearish signal. 4️⃣ Higher time frame analysis may help you to set a safe stop loss. In the picture above, you can see that stop loss placement above a key daily resistance could help you to avoid stop hunting shorting the Dollar Index. Analyzing the market solely on 1H time frame, stop loss would have been placed lower and the position would have closed in a loss. Always check multiple time frame when you analyze the market. It is highly recommendable to apply the combination of at least 2 time frames to make your trading safer and more accurate. ❤️Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
6
XAU/USD Asian Range Backtesting Notes: Asian Range is 19:00 - 00:01 (7pm-midnight est) on 1Hr time frame Gold plays well off the Asian range Highs and lows are usually Whole numbers ; Asian mid is on or around the 500 lvl Best entries (London): 12:30 - 2am est after range has completed Best entries (New York): 7:30 - 8 est Entries taken from the Asian high low ONLY after the range has completed Profit levels can be found previous Asian levels or previous higher time frame Highs/Lows (look left for history) TRADE THE TREND: Marking off Asian levels on a consistent basis help build the story for which trend is in play. From day to day, asian levels turn into each other often or turn into opportune entry points. (i.e Tuesdays Asian High = Wednesday Daily High, Wednesdays Asian High = Thursday Daily Low) Avoid countertrading for the biggest rewards & chances to scale in on one position. BE PATIENT! Trading outside the times & zones will leave you in consolidation, whipsawed, stop hunted or just waiting for price to move vs getting parabolic movement after entry. *Please like and comment below as you see fit. I am trying to build my reputation on tradingview and it would be greatly appreciated if you show love if you received value #WakeUpInProfit #TeamWakeUpInProfit
OANDA:XAUUSDEducation
by WakeUpInProfit
Ninja Talks EP 30: Jesse Livermore 🐐Jesse Livermore, arguably the best trader to ever live dropped knowledge in almost every sentance he uttered. So as a gift from me to you... Here are FIVE quotes that got my Ninja senses tingling today. Follow, like and comment. Let's go! Jesse Livermore: "The stock market is filled with individuals who know the price of everything, but the value of nothing." Ninja: Just like a master Ninja can spot a mere illusion amidst chaos, a successful speculator sees through the deceptive mirage of price fluctuations and focuses on the true value hidden within the market's depths. Jesse Livermore: "Don't be a hero. Don't have an ego. Always question yourself and your ability." Ninja: In the realm of financial combat, a true Ninja knows that humility is the path to victory. Never let your ego blind you, always question your skills, and remain a humble warrior, ready to adapt and learn from every encounter. Jesse Livermore: "The stock market is never obvious. It is designed to fool most of the people, most of the time." Ninja: Just like a stealthy Ninja, the stock market moves in mysterious ways, deceiving the masses. Only those with sharpened instincts and keen perception can see through the smokescreen, predicting its unpredictable nature and exploiting its hidden opportunities. Jesse Livermore: "Markets are never wrong; opinions often are." Ninja: A Ninja warrior understands that the market's verdict is final, like a masterful stroke of the katana. It is the opinions of speculators that falter and crumble like weak defenses. Trust the market's judgment, and let it guide you towards victory. Jesse Livermore: "The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the man of inferior emotional balance, or for the get-rich-quick adventurer." Ninja: Speculation is a battlefield where only the disciplined and sharp-minded Ninja thrives. It demands intelligence, focus, emotional stability, and patience—a test for the true warriors who seek wealth not as a quick prize, but as a result of their calculated moves and strategic maneuvers. So there you have it, if you enjoyed this episode of Ninja Talks and want more then like, comment and follow and I'll see you in the next ep! Keep your blades sharp! Nick
AMEX:SPYEducation
by NinjaTradingServices
Read this if u want to begin with chart!! o read a chart effectively, follow these steps: Choose a Timeframe: Select the timeframe that suits your trading or analysis goals. Common timeframes include minutes (e.g., 5 minutes, 15 minutes), hours (e.g., 1 hour, 4 hours), days (e.g., 1 day, 1 week), or months (e.g., 1 month, 3 months). Understand Candlesticks: Candlesticks represent price movements within the chosen timeframe. Each candlestick has a body and sometimes wicks or shadows. The body shows the opening and closing prices, while the wicks/shadows indicate the high and low prices during that timeframe. A green or white candlestick typically indicates a price increase, while a red or black candlestick indicates a price decrease. Identify Trendlines: Trendlines are lines drawn on the chart to connect higher highs (resistance) or lower lows (support). They help identify the overall trend and potential levels at which the price may encounter resistance or support. An upward trendline indicates a bullish trend, while a downward trendline suggests a bearish trend. Use Technical Indicators: Charts often include technical indicators that provide additional insights into price and volume movements. Common indicators include moving averages, RSI (Relative Strength Index), MACD (Moving Average Convergence Divergence), and Bollinger Bands. These indicators can help identify trends, momentum, and potential reversal points. Analyze Volume: Volume bars or lines represent the trading volume accompanying each candlestick. Higher volume often indicates increased market participation and can confirm the strength of a price movement. Pay attention to volume spikes, as they may indicate significant market interest or potential trend reversals. Spot Support and Resistance Levels: Support levels are price levels at which buying pressure tends to be strong, preventing the price from falling further. Resistance levels are price levels where selling pressure tends to be strong, preventing the price from rising further. These levels can be identified based on historical price patterns and can act as potential entry or exit points for trades. Recognize Chart Patterns: Chart patterns, such as triangles, head and shoulders, or double tops/bottoms, provide insights into potential price reversals or continuations. These patterns are formed by the price movements and can help traders anticipate future price action. Study and understand these patterns to enhance your chart reading skills. Consider Market News and Events: Stay updated on market news, economic announcements, and other events that may impact the price of the asset you're analyzing. Major news releases or unexpected events can significantly influence market movements. Combine Multiple Timeframes: Analyzing multiple timeframes can provide a broader perspective on price movements and trends. For example, use a higher timeframe to identify the overall trend and a lower timeframe for precise entry and exit points. Practice and Learn: Reading charts effectively requires practice and experience. Continuously analyze charts, study different assets, and compare your analysis with the actual price movements to improve your skills. Keep a trading journal to record your observations, strategies, and outcomes to learn from your trades. Remember that chart reading is a skill that develops over time. It's important to complement chart analysis with other forms of analysis, such as fundamental analysis and market sentiment, to make informed trading decisions.
Education
by agrawalmohit000021
⭐️ Support And Resistance | Definition & Strategies ⭐️Support and resistance levels are fundamental aspects of trading, holding significant importance in various financial markets, including the dynamic forex market. These critical levels signify specific price zones on a chart where buyers and sellers actively participate, exerting influence on market movements. Consequently, comprehending the impact of support and resistance levels is crucial for traders seeking to make well-informed decisions and capitalize on trading opportunities. This comprehensive article aims to explore the significance of support and resistance levels, delve into methods of correctly identifying and drawing them, outline effective trading strategies, and present techniques for filtering out false signals. Armed with a comprehensive understanding of these concepts, traders can elevate their trading proficiency, potentially leading to improved profitability and success in the forex market. Support and resistance levels act as psychological barriers, reflecting the collective behavior of market participants. Support represents a price level where buying pressure tends to overcome selling pressure, causing prices to reverse direction and rise. On the other hand, resistance signifies a price level where selling pressure typically surpasses buying pressure, leading to price reversals and declines. These levels are formed based on previous market reactions, such as historical highs and lows, trendlines, and chart patterns. Traders consider support and resistance levels as critical reference points, as they help identify potential entry and exit points, define risk and reward ratios, and anticipate market reversals or continuations. To accurately identify and draw support and resistance levels, traders employ various techniques and tools. One popular method is the swing high and swing low approach. Traders identify significant peaks (swing highs) and troughs (swing lows) on a price chart and draw horizontal lines connecting them. These lines act as reference levels, indicating potential areas of support and resistance. Additionally, trendlines can be utilized to identify dynamic support and resistance levels, providing insights into the overall market trend. Once support and resistance levels are identified, traders can implement effective trading strategies to capitalize on these market dynamics. One common approach is to buy at support and sell at resistance. When prices approach a support level, traders anticipate a price bounce and look for buying opportunities. Conversely, when prices approach a resistance level, traders expect a potential price reversal and consider selling or shorting the asset. This strategy allows traders to enter trades with favorable risk-reward ratios, aiming to capture price movements away from support or resistance levels. What is it exactly a Support and Resistance ? Support and resistance levels represent crucial price clusters where buyers and sellers engage in competition. A support level denotes a specific price point where the demand for an asset becomes sufficiently strong to halt further declines in its value. As the price approaches the support level, it is reasonable to expect an increase in buyer activity and a decrease in seller activity, resulting in higher buying volume and reduced selling volume. When the price reaches the support line, there is a high likelihood of a rebound occurring, as this line establishes a significant psychological low within the market. Support levels essentially "support" the price, preventing it from continuing its downward trajectory. It's important to note that support and resistance levels are not fixed points. Prices may approach these levels with slight deviations, either falling just short of reaching them or temporarily dipping slightly below the line. If the price successfully breaks through the support line and proceeds to decline, it undergoes a transformation and assumes the role of a resistance level. Use of the Resistances on Bearish trend. Use of The Supports on Bullish trend. Use of Support and Resistance on Sideways / Range market. Resistance levels are the opposite of support. These marks appear when supply becomes equal to demand. The logic here is that as the resistance level is approached, the volume of buyers decreases, while the volume of sellers gradually increases. At the point where the balance is reached, the price will stop, and further growth will stop. The resistance level is always above the price. The name also speaks for itself. This mark is as if restraining the price from further growth by resisting it. How To Trade On Support And Resistance Levels: Trading based on support and resistance levels is a popular approach within the forex trading community. These levels represent specific areas on a price chart where the market tends to reverse or consolidate, presenting potential opportunities for buying or selling. To effectively trade support and resistance levels, follow these steps: - Identify significant support and resistance levels: Analyze historical price data to locate areas where the price has previously reversed or encountered difficulty in breaking through. This can be done by observing swing highs and swing lows, trendlines, Fibonacci retracement levels, or horizontal price levels. - Mark the identified levels on your chart: Once you have identified key support and resistance levels, mark them on your chart. This visual representation helps you recognize the areas where potential trading opportunities may arise. - Monitor price reactions: Keep a close eye on the price as it approaches the support or resistance levels. Look for indications of a potential reversal or a breakout from the level. These indications can include candlestick patterns, chart patterns, or the signals from indicators that suggest a shift in market momentum. - Confirm with additional indicators: While support and resistance levels can be traded on their own, it can be beneficial to use supplementary indicators or tools to validate your trading decisions. For instance, you can employ oscillators like the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD) to assess overbought or oversold conditions. - Define your entry and exit points: Once you have identified a potential trading opportunity based on support and resistance levels, establish your entry point, determine a suitable Stop Loss level (to limit potential losses), and set a take-profit level (to secure profits). Technical analysis, such as considering the distance between the entry point and the nearest support or resistance level, can help determine these levels. Manage your risk: Proper risk management is crucial when trading support and resistance levels. Consider implementing appropriate position sizing, setting Stop Loss orders to protect against excessive losses, and maintaining a favorable risk-to-reward ratio. This approach ensures that even if some trades are unsuccessful, your overall trading strategy remains profitable. Practice and refine your strategy: Mastery of support and resistance trading comes with practice and experience. Begin by testing your approach on a demo account or using backtesting software to evaluate its performance based on historical data. Refine your strategy based on your observations and gradually build your confidence. Support And Resistance Trading Strategies Support and resistance trading strategies offer various approaches to capitalize on price dynamics around these key levels. Here are several common strategies employed by traders: Breakout Strategy: This strategy involves trading the breakout of support and resistance levels. When the price surpasses a resistance level or falls below a support level, it indicates a potential continuation of the prevailing trend. Traders can initiate a long position after a resistance breakout or a short position following a support breakdown. Setting a Stop Loss order below the breakout level helps manage risk. Bounce Strategy: With the bounce strategy, traders anticipate price bounces off support and resistance levels. When the price approaches a support level, traders can enter long positions, placing a Stop Loss order below the support level. Conversely, when the price nears a resistance level, traders can go short, setting a Stop Loss order above the resistance level. The expectation is that the price will reverse from these levels, presenting profitable trading opportunities. Range Trading: Range trading occurs when the price fluctuates between a support and resistance level. Traders can exploit this by buying near the support level and selling near the resistance level. To enhance range trading, traders identify the range boundaries and employ technical indicators such as oscillators to assess overbought and oversold conditions within the range. Pullback Strategy: In this strategy, traders wait for the price to retrace to a support or resistance level after a breakout. The idea is to enter trades in the direction of the breakout once the pullback is complete. For instance, if the price breaks above a resistance level, traders wait for a pullback to the support-turned-resistance level before initiating a long position. Confluence Strategy: This strategy combines support and resistance levels with other technical indicators or chart patterns to increase trading probabilities. Traders search for instances where multiple factors align, such as a support level coinciding with a trendline or a Fibonacci retracement level. This convergence of factors strengthens the signal for potential trading opportunities. How To Filter False Signals ? Filtering out false signals when trading support and resistance levels can indeed be challenging. However, there are several strategies you can employ to increase your accuracy and minimize the impact of false signals. Here are some helpful tips: - Confirm with multiple indicators: Relying on a single indicator can lead to false readings. To enhance the reliability of your analysis, consider using multiple indicators that complement each other. Look for indicators that align with your support and resistance levels, such as trendlines, moving averages, or oscillators. When multiple indicators converge and provide consistent signals, it strengthens the confirmation for potential trading opportunities. - Analyze price action: Study how the price behaves around support and resistance levels. Look for clear and decisive price movements, such as strong breakouts or bounces, accompanied by significant volume. False signals often exhibit choppy or erratic price action, lacking conviction. By analyzing price action, you can gain insights into the strength or weakness of support and resistance levels. - Consider multiple time frames: Analyze support and resistance levels across different time frames. Levels that hold on higher time frames carry more significance. Focus on levels that align and hold on multiple time frames, as they are more likely to attract market participants and generate reliable signals. The confluence of levels across different time frames increases the validity of the signals. - Monitor the market context: Consider the broader market context, including the overall trend, market sentiment, and significant news or events. Support or resistance levels that align with the prevailing trend and market sentiment are more likely to generate valid signals. Conversely, levels that conflict with the trend or market sentiment may produce false signals or indicate potential reversal points. Understanding the market context can help you filter out false signals. - Be patient and selective: Avoid jumping into trades based on every touch of a support or resistance level. Exercise patience and wait for strong confirmation signals before entering a trade. Look for price rejections, candlestick patterns, or breaks with high volume and momentum. Being patient and selective in your trades increases the probability of accurate signals and minimizes the impact of false signals on your trading. - Implement proper risk management: Effective risk management is crucial to mitigating the impact of false signals. Set appropriate Stop Loss orders to limit potential losses if a trade goes against you. Consider using Trailing Stops to protect profits as the trade moves in your favor. By managing your risk properly, you can protect your trading capital and minimize the adverse effects of false signals on your overall trading performance. By incorporating these strategies into your trading approach, you can enhance your ability to filter out false signals and increase your accuracy when trading support and resistance levels. Remember to practice, adapt to changing market conditions, and continuously refine your trading strategy. Conclusion : Support and resistance levels are crucial elements in the forex market, exerting a significant influence on price movements and market dynamics. These levels represent areas where supply and demand imbalances occur, leading to trend reversals, consolidations, breakouts, and impacting market psychology. Correctly identifying and drawing support and resistance levels is vital for traders as it helps them identify potential buying and selling opportunities. Traders can utilize various trading strategies to capitalize on these levels. Breakout strategies involve trading the breakouts of support or resistance levels, while bounce strategies focus on trading price bounces off these levels. Range trading strategies take advantage of price oscillations within established support and resistance boundaries, while pullback strategies involve trading in the direction of the breakout after a price retracement. However, it's essential to filter out false signals to avoid erroneous trading decisions. This can be achieved by using multiple indicators that complement each other and provide confirmation signals. Analyzing price action helps in understanding the strength or weakness of support and resistance levels. Considering different time frames allows traders to identify levels that hold significance across various intervals. Assessing the broader market context, including the overall trend and market sentiment, helps to avoid false signals that conflict with the prevailing market conditions. Additionally, exercising patience and selectivity when entering trades ensures that traders wait for strong confirmation signals before taking action. Implementing proper risk management techniques, such as setting appropriate Stop Loss orders and employing position sizing strategies, protects traders from excessive losses and manages risk effectively. By incorporating these principles into their trading approach, traders can navigate the complexities of support and resistance levels and increase their chances of success in the forex market.
Education
by FOREXN1
16
Lessons from Betrayal: Understanding the Judas Swing in Trading.The term "Judas Swing" is a trading concept coined by ICT (Inner Circle Trader) that refers to a price movement that traps traders in a false breakout before reversing direction. The name is derived from the biblical figure Judas Iscariot, who betrayed Jesus with a kiss. In the context of trading, a Judas Swing occurs when price briefly breaks out of a key support or resistance level, triggering stop-loss orders and attracting traders who anticipate a continuation of the breakout. However, instead of continuing in the breakout direction, the price swiftly reverses and moves in the opposite direction, causing losses for those who entered positions based on the false breakout signal. The purpose of the Judas Swing is to "shake out" weak traders or those with incorrect market bias before resuming the original trend. It is a common occurrence in the markets and can be frustrating for traders who fall victim to it. To navigate the Judas Swing, traders can take several precautions: Identifying a Judas Swing requires careful observation and analysis of price action. Here are some steps to help you identify a potential Judas Swing: 1. Monitor Price Approaching a Level: Pay close attention to how price behaves as it approaches a key support or resistance level. Look for signs of anticipation or excitement among traders, as this can indicate the potential for a false breakout. 2. Look for a Breakout: Watch for a breakout where the price moves convincingly above or below the support or resistance level. This breakout typically attracts traders who believe the price will continue in the breakout direction. 3. Observe the Speed and Volume of the Move: Take note of the speed and volume of the breakout. If the price quickly and forcefully moves beyond the level, it could be a sign of a potential Judas Swing. A strong breakout followed by a sudden reversal can trap traders who entered positions based on the breakout. 4. Analyze Candlestick Patterns: Pay attention to the candlestick patterns that form during and after the breakout. Look for bearish engulfing patterns (a larger bearish candle engulfing the prior bullish candle) or bullish engulfing patterns (a larger bullish candle engulfing the prior bearish candle) as potential indications of a reversal. 5. Confirm the Reversal: To confirm the potential Judas Swing, look for additional signs of reversal. This can include a strong rejection of the breakout level, a rapid change in momentum indicated by a shift in volume, or a divergence in an oscillator indicator such as the Relative Strength Index (RSI). 6. Consider Confirmation from Other Indicators: Use additional technical indicators or chart patterns to confirm the potential Judas Swing. This can include trendlines, moving averages, or other support and resistance levels. Look for confluence or alignment of signals to increase the reliability of the setup. 7. Exercise Patience and Wait for Confirmation: Avoid rushing into a trade based solely on the potential Judas Swing. Wait for confirmation of the reversal before entering a position. This helps minimize the risk of mistaking a false breakout for a genuine one. Utilizing the concept of a Judas Swing in trading involves recognizing and capitalizing on false breakouts. Now let's take a look at some steps to effectively use the Judas Swing concept: 1. Identify Key Support and Resistance Levels: Determine the significant support and resistance levels on the price chart. These levels can be identified using previous swing highs and lows, trendlines, or chart patterns such as channels or rectangles. 2. Wait for a Breakout: Monitor the price as it approaches a key support or resistance level. Wait for a breakout where the price moves convincingly above or below the level. 3. Look for Signs of a Judas Swing: Observe the behavior of the price following the breakout. If the breakout is a Judas Swing, the price will quickly reverse back into the previous range or opposite direction, trapping traders who entered positions based on the breakout. 4. Confirm the Reversal: To confirm the Judas Swing, look for signs such as a sharp reversal candlestick pattern (e.g., a bearish or bullish engulfing pattern), a strong rejection of the breakout level, or a rapid change in momentum indicated by a shift in volume or a momentum oscillator like the Relative Strength Index (RSI). 5. Enter a Trade: Once the Judas Swing is confirmed, consider entering a trade in the direction opposite to the initial breakout. This means taking a position against the majority of traders who fell for the false breakout. However, ensure you have a solid trading plan and risk management strategy in place. 6. Set Stop-Loss and Take-Profit Levels: Place a stop-loss order above the recent swing high (for short trades) or below the recent swing low (for long trades) to manage risk. Set a take-profit level based on your profit target or technical indicators such as support and resistance levels or Fibonacci retracement levels. 7. Monitor Price Action: Continuously monitor the price action following the entry. Adjust the stop-loss level if necessary to protect profits or minimize losses. Consider trailing the stop-loss to lock in gains as the price moves in your favor. 8. Exit the Trade: Exit the trade when the price reaches your predetermined take-profit level or if the market conditions change, invalidating your trade setup. So what did your understand? Judas swing is the false breakout. For some traders it's a disaster as it will take them out of the trade. But actually it is an opportunity to take advantage of. In SMC people call it taking out of liquidity, what ever the name is , everything is same. The simplest way you can make use of the Judas or False break out is by waiting for it happen. After the breakout wait for the price to come to our support or resistance zone and clear it's low or high. Next thing to do is entering the trade on the retracement that it will make and keeping the SL above or below the Judas swing or False Breakout. Simple as that. Money is made by waiting so keep calm and wait for it to happen, don't rush and take your entries. Instead of making the post small, i have elaborated it a bit above for you guys to understand. Remember, false breakouts can occur, but not every breakout will result in a Judas Swing. Proper risk management, thorough analysis, and confirmation from other technical indicators or patterns can increase the likelihood of successfully identifying and trading Judas Swings. Practice and experience are key to mastering this trading concept.
OANDA:XAUUSDEducation
by protontrader0
2
Top 4 Strategies for Position TradingPosition trading is a time-tested approach to the financial markets, allowing traders to profit from long-term trends. In this article, we’ll explore the top four strategies for positional trading, discuss the features of successful position traders, and briefly examine three essential indicators that can help with your position trading journey. What Is Position Trading? Position trading is a type of trading where a trader holds onto their positions for an extended period, typically ranging from weeks to months or even years. In contrast to day traders, who attempt to profit from intraday price fluctuations, or swing traders, who hold their positions for days or weeks, position traders adopt a more patient approach, allowing their trades to develop over a longer period. This can lead to potentially greater profits, as well as reduced transaction costs and stress associated with constant monitoring of the markets. The main goal of position trading is to capitalise on long-term trends in a given market, such as stocks, forex, or commodities. Position traders typically rely on a combination of fundamental analysis, technical analysis, and market sentiment to make their trading decisions. They use this analysis to identify and participate in trends on the daily, weekly, and monthly timeframes. Features of a Position Trader Successful position traders often exhibit unique characteristics that set them apart from other types of traders. Some of the key features are: - Patience: Position trading demands patience as traders wait for opportunities to arise and positions to develop over weeks, months, or years. Remaining calm and focused during market uncertainty is essential. - Discipline: Position traders must maintain discipline in their approach. This includes sticking to their trading plan, managing their risk effectively, and resisting the urge to exit their positions prematurely. - Long-Term Focus: Successful position traders concentrate on overall market direction, not short-term price movements, enabling them to identify opportunities that short-term traders might overlook. - Strong Fundamental Analysis Skills: Since fundamental factors often drive long-term trends, exceptional fundamental analysis skills are crucial for gauging where the market may be headed next. Positional Trading Strategies Now that we have an overview of position trading let’s examine four effective positional trading strategies. Support and Resistance Trading At the heart of many positional trading strategies are support and resistance. Support refers to a price level where buying interest is strong enough to overcome selling pressure, leading to a pause or reversal in a downward movement. Resistance is the opposite: a price level where sellers overtake buyers, prompting a stall or reversal in an upward trend. Support and resistance can be identified through various methods, including: - Examining historical turning points in the market - Identifying broken support/resistance, which may now act as resistance/support, respectively - Using trendlines - Using technical indicators, like Fibonacci retracements or moving averages. Position traders will usually highlight areas of support/resistance on the daily, weekly, or monthly charts in the direction of the broader trend, then enter a position when the price reaches the area. They may take profits at an opposing significant support/resistance level and set their stop losses beyond the area they entered at. Breakout Trading Breakout trading, as the name suggests, involves taking positions once these key areas of support or resistance are broken through. This approach can be particularly effective since it allows traders to potentially catch the start of a substantial move. Position traders will wait for a higher timeframe support/resistance level to break. To confirm breakouts, position traders often look for an increase in volume, which may indicate a surge in market interest and momentum. It’s also best to wait for the candle to close before entering the position, as this helps to confirm the breakout. Stop losses are usually set beyond a nearby swing point, while profits can be taken at a significant opposing level. As breakouts are generally part of a larger trend continuation, some traders may prefer to trail their stop losses at swing points to maximise profits. Pullback Trading Pullback trading is effectively an extension of breakout trading. However, instead of entering when the level is broken, traders wait for a retracement, allowing them to optimise their entry points and risk/reward ratio. A pullback occurs when the price temporarily moves counter to its broader trend before resuming its original direction. Position traders commonly look for a retracement to a previous area of support in a downtrend (expected to act as resistance) or resistance in an uptrend (expected to act as support). Alternatively, they may use the Fibonacci retracement tool. For confirmation that the area will hold, traders will often look for reversal candlestick patterns like hammers or shooting stars. For instance, position traders wait for a support/resistance level to be broken. However, they then observe the price action until a retracement occurs, watching for a reversal candlestick pattern. Once the pattern forms, they enter at the close of the candle. Profits can be taken at the high or low that originated the pullback or at a significant support/resistance level. Conversely, traders may prefer to trail their stop loss as the trend progresses. Triple Moving Averages Moving averages (MAs) are technical indicators that smooth out price data to reveal underlying trends. By combining multiple MAs, position traders can better understand where the price may be headed next. In this position trader’s strategy, we use the exponential moving average (EMA), which is slightly more responsive to recent price action. Simple moving averages (SMAs) are a good alternative. Want to see the difference for yourself? Hop over to FXOpen’s free TickTrader platform to find EMAs, SMAs, and a whole host of versatile trading tools. There are three components: a short-term EMA (20 periods), an intermediate-term EMA (50 periods), and a long-term EMA (200 periods). Combining the three allows us to account for both recent price changes and long-term trends. They are coloured blue, orange, and red, respectively, on the chart above. Trades can be taken when the short-term EMA crosses the long-term, but it’s best to wait for both the short-term and intermediate-term EMAs to break through the long-term in the same direction. In doing so, we have confirmation that trend momentum is picking up. Traders open a long position when the short and intermediate-term EMAs cross above the long-term one and open a short position when they cross below the long-term one. Stop losses can be placed just beyond the long-term EMA. The theory states that a profit can be taken when MAs cross over again. Position Trading Indicators Alongside the strategies listed, position traders use a variety of technical indicators to help identify and improve entries. Some of the most popular indicators employed by positional traders include: - Relative Strength Index (RSI): RSI is a momentum oscillator that shows overbought and oversold areas, helping traders spot potential reversals. - Bollinger Bands: Bollinger Bands are a volatility-based indicator that plots standard deviations of price. They can be used to identify impending trend reversals and periods of increased volatility. - On Balance Volume (OBV): OBV is a volume-based indicator that measures buying and selling pressure, allowing traders to confirm potential breakouts and trend reversals by analysing changes in volume. Final Thoughts In summary, position trading is a unique approach that removes much of the stress of intraday styles. If you’re ready to find the best positional trading strategy for you, consider opening an FXOpen account. You’ll be able to put these strategies to the test in over 600 markets, safe in the knowledge that you’re partnering with Traders Union’s Most Innovative Broker of 2022. Good luck! This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
8
FibDiv Strategy Explained by SkyrexioHello, everyone! One of the strategies which I use in my trading routine is FibDiv strategy. This strategy differs from other based on Fibonacci retracement, but in my opinion has higher win rate and clear rules to enter and exit trades. To apply this strategy follow the steps below. 1️⃣FIBONACCI RETRACEMENT SETTINGS Firstly you should set the additional levels to your Fibonacci retracement tool. You need to enter the following levels: 0, 0.5, 0.61, 1, -0.18, -0.27, -0.61. The zone between -0.27 and -0.18 is the first strong resistance. -0.61 is the final target. All these additional level should be appeared above zero level as you can see on the Chart 1. 2️⃣HOW TO FIND THE IMPULSE? FibDiv strategy is the trend following one. The idea is to identify the impulse and buy at the potential correction bottom. Here are the rules to correctly identify the impulse. 1.Start at the some local bottom point and follow the next candles 2.Stop at the point, where you will see 3 red candles. These candles should not obligatory be consequtive, but first red candle's open should be higher than second's and third's 3.Compare the highest green candle's close and next red candle's open. If close > open put the 0 Fibonacci level to green candle's high. Otherwise put on red candle's high 4.Place 1 Fibonacci level at the impulse start 5.We identified impulse🚀 3️⃣HOW TO OPEN TRADE? In our case we consider only long trade case. You can use the reverse logic to find short trades. When the impulse was identified we should wait for the price reach 0.5 Fibonacci retracement level. There we can consider the potential long setups on the lower time frame. For example if you use 4h go to 15-30 min to find the local setups which you used to use in your trading. Fib Div gave you the confluence zone where you can find any trades with higher probability. If you want me to tell you about these setups smash the rocket 🚀 button and I will share another article. If you are new in trading you can just buy at 0.5 - 0.61 level and put your stop loss below 1 Fibonacci level. 4️⃣WHEN YOU SHOULD CLOSE TRADE? If the price continues going down after reaching the buy zone and break the 1 Fibonacci level - Fibo is invalidated and trend is broken. Remove the Fibonacci and search for the next impulse. If your entry was right and price continues pumping the first target is zone between -0.27 and -0.18. You can close 50% of position here and for the rest part set stop loss at entry and wait for the final target at -0.618. Close the rest 50% here and remove the Fibonacci. Find the new impulse and repeat this approach. On the chart 2 you can find the proper setup for this strategy on Bitcoin. I need to tell you also that if you place your stop loss below level 1, you is going to have 1.5-2 : 1 risk to reward ratio. It's enough to make money, but not perfect. Advanced techniques finding entry point which I mentioned above will allow you to increase risk to reward ratio up to 5:1 or higher. Best regards, Ivan 🔥Guys, if you want me to tell you about advanced techniques from my experience follow me and smash the rocket🚀 button.🔥
Education
by Skyrexio
3
Trading week recap for NASDAQ, DOW, DAX & FTSE (01/07/2023)We had successful trades with the NASDAQ and the DAX. Let's look back at the past trading week and learn from it. What went well? What could be better? This is an experiment. Educational content to become a good waver. If you like this video, please let me know by commenting. Any suggestions? Please let me know. Something went wrong with the recording for the last part on the FTSE. We continue the analysis on Monday.
OANDA:NAS100USDEducation
by AndyCuckoo
Understanding Resistance and Support Levels in Financial ChartsIntroduction When analyzing financial charts, traders and investors often encounter resistance and support levels. These levels represent price points at which a financial instrument has historically faced obstacles in moving higher (resistance) or lower (support). Understanding the formation of these levels can provide valuable insights into market dynamics and aid in making informed trading decisions. In this article, we will explore why resistance and support levels form in charts and their significance in technical analysis. Resistance Levels: The Ceilings of Price Movements Resistance levels act as barriers that impede the upward movement of prices. Here are three primary reasons why resistance levels form: 1. Psychological Factors: Investor sentiment and market psychology play a crucial role in resistance level formation. When a financial instrument approaches a previous all-time high, many investors may decide to sell their holdings, fearing a potential price reversal. This collective behavior creates selling pressure, preventing the price from surpassing the resistance level. 2. Profit-Taking: Traders who purchased a financial instrument at lower prices often aim to take profits when prices rise. When a significant number of traders decide to sell near a specific price level, it generates selling activity that impedes further price increases and establishes resistance. 3. Supply and Demand Imbalance: Resistance levels can emerge due to an imbalance between the supply and demand for a financial instrument. If there is an abundance of sellers at a particular price level, the market becomes saturated with supply. As a result, buyers find it challenging to absorb the selling pressure, leading to resistance. Support Levels: The Floors of Price Movements Support levels act as price floors, preventing prices from declining further. Here are three key reasons why support levels form: 1. Bargain Hunting: When prices decline and reach a certain level, investors often perceive it as an opportunity to buy at a discounted price. The belief that the asset is undervalued attracts buyers, creating demand and establishing support at that level. 2. Value Perception: Support levels can emerge when investors believe that the price of a financial instrument has fallen to a level that represents good value for money. This perception encourages buyers to enter the market and support the price. 3. Stop Loss Orders: Traders commonly employ stop loss orders to limit potential losses. These orders are often placed just below support levels. When the price reaches the support level, the stop loss orders are triggered, resulting in an influx of buying activity. This increased demand helps create a support level. Utilizing Resistance and Support Levels in Trading It's important to note that resistance and support levels are not infallible predictors of future price movements. However, they offer valuable insights into market sentiment and can be used in conjunction with other technical and fundamental analysis tools. Here are a few ways traders and investors utilize resistance and support levels: 1. Identifying Breakout and Reversal Points: Traders monitor resistance levels to identify potential breakout points, where prices may surpass the resistance and continue their upward trajectory. Similarly, support levels are observed to identify potential reversal points, where prices may bounce off the support and resume an upward movement. 2. Determining Entry and Exit Points: Resistance and support levels assist traders in determining optimal entry and exit points for their trades. Traders may consider selling or taking profits near resistance levels and buying or adding to positions near support levels. 3. Risk Management: By analyzing resistance and support levels, traders can establish appropriate stop loss levels to manage their risk. Placing stop loss orders just below support levels or above resistance levels can help limit potential losses in case of price reversals. Conclusion Resistance and support levels in financial charts provide valuable insights into market dynamics and historical price behavior. They are formed due to various factors, including psychological influences, supply and demand imbalances, profit-taking, and bargain hunting
OANDA:XAUUSDEducation
by protontrader0
Learn the ONLY REASON Why You Should Try on RETEST!Hey traders, Being breakout traders we have two options for trade entries: when the breakout is confirmed, we can either open a trading position aggressively once the candle closes above/below the structure, or we can be conservative and wait for a retest of the broken structure first. What is peculiar about the second option is the fact that the majority of pro traders prefer the retest entries. In this article, we will discuss the pros and cons of retest trading. ✔️First, let's discuss whether the retest is guaranteed. NO. How often do we see that? Around 50-55% of the time. Does it mean that 45-50% of breakout trades will be missed? YES. The main disadvantage of retest trading is that a lot of trading opportunities will be missed. Occasionally the breakout triggers a strong market rally, not letting the price return back to the broken structure. Take a look at that triangle pattern on Bitcoin. The price broke its support BUT did not retest it, so trading only the retest, the opportunity would be missed. So what is the point to wait for a retest then? Why let the market go without us in case if there is no retest? ✔️Most of the time the breakout candle closes quite far from a broken level. Opening the trading position once the candle closes and setting a stop loss below/above the broken structure, one can get a very big stop loss. Such a big stop that its pip value exceeds or equals the potential return. 🖼In the picture, I drew a classic channel breakout trade. The aggressive trader opened a long position as the candle closed above the channel's resistance. His stop loss is lying below the lower low of the channel. Analyzing his risk to reward ratio, we can see that his reward equals his risk. On the right side is the position of the conservative trader. His stop loss in lying on the same level. However, instead of opening a trading position on a breakout candle, he decided to wait for a retest of the broken resistance of the channel. Just a slight adjustment of his entry-level gives him a completely different risk to reward ratio. ❗️Patience pays in trading. Missing some trades a retest trader will outperform the aggressive trader in the long run. Trading is about weighting your potential gains & losses. Paying commissions and swaps for every trade, it is much better for us to trade less but pick the setups that give us a decent potential reward. What type of trading do you prefer? Let me know, traders, what do you want to learn in the next educational post?
Education
by VasilyTrader
7
What Is Swing Trading?Are you looking for a way to take advantage of short-term market movements without the stress of day trading? Look no further than swing trading. In this article, we’ll dive deep into the world of swing trading, exploring how it differs from day trading, discussing its advantages and disadvantages, and taking a look at some of the most popular swing trading tools and indicators. The Basics of Swing Trading Swing trading involves holding a position for a short to medium period of time - usually a couple of days to a few weeks - with the aim of profiting from the “swings” in the market. A swing trader’s definition is simple: swing traders are those who typically enter and exit at significant support and resistance levels, hoping to capture the bulk of an expected move and take profits at potential reversal points in the market. The swings are marked with numbers in the chart below. These traders tend to look at hourly to weekly charts to guide their entries, although the specific timeframe used will depend on the swing trader’s individual style and the asset being traded. It can be used across all asset classes, from stocks and forex to crypto* and commodities. Swing plays in the stock market can be especially effective, as stocks tend to experience plenty of volatility and are subject to frequent news and events that can drive prices to traders’ targets. Swing traders predominantly use technical analysis to determine their entries and exits, but fundamental analysis can also play a significant role compared to shorter-term styles, like day trading. Fundamental analysis, like comparing the interest rates of two economies, can help to set a swing trader’s directional bias over the course of days or weeks. Swing Trading vs Day Trading On the face of it, swing trading and day trading may look similar. After all, both types of traders may look to profit from one key support/resistance level to another. However, there are significant differences between them. The most distinct difference is the holding period. Day traders aim to close all of their positions by the end of the day and tend to exit a trade within a few hours. It’s rare for swing traders to hold a position for less than a day, although it can happen if their target is met during extreme market volatility. Long-term swing trading can involve holding a position for months - something you won’t see any day trader doing. This difference in holding period has important implications for risk management. Day trading can be riskier than swing trading, as day traders are exposed to more volatility and are more susceptible to sudden price movements. Swing traders, on the other hand, have more time to react to changes in the market and ignore intraday noise in favour of focusing on their longer-term target. However, because day traders don’t hold their positions overnight, they also avoid the risk of any adverse events affecting their position while they’re asleep. Swing traders don’t have this luxury. The frequent in-out nature of day trading means active traders can incur more commission fees than swing traders. Spreads are also less of a concern when swing trading, as wide intraday spreads impact a swing trader’s position less than they impact the position of a day trader. Finally, the psychological and time pressures are reduced when swing trading. Day trading can be a highly stressful activity, and it requires near-constant attention to the charts. Swing trading can be a much more relaxed approach, avoiding the stresses of intraday price movements and allowing for much less active management. Swing Trading Advantages and Disadvantages Swing trading has several advantages that make it a popular choice for many traders. That said, it comes with a few disadvantages traders should be aware of. Let’s consider them. Advantages - Lower Time Commitment One of the biggest benefits for swing traders is the reduced time commitment. Many of us have other things going on that mean we can’t commit several hours a day to trading. Swing trading can be adapted to suit a trader’s individual schedule and may only require a few hours each week to be successful. - Flexibility Swing trading is often more flexible than other styles of trading. Not only does it offer time flexibility, but it allows for a wider range of instruments to be traded. For example, you might have trouble performing technical analysis on the 1-minute chart for an illiquid stock, while the 1-hour chart has plenty of price action for you to analyse. In the stock market, swing trading may even be preferred because of the greater number of opportunities it can present. - Potential Higher Returns Than Long-Term Trading Because swing traders usually hold positions for a few days to a few weeks, they have the ability to take advantage of shorter-term market movements that might not be reflected in longer-term price trends. For instance, if a stock experiences a temporary dip in price due to a short-term event, swing traders can take advantage of this dip and make a quick profit when the stock rebounds. Disadvantages - Less Time to React to Market Changes What is a swing trader’s biggest disadvantage? The amount of time they have to react to sudden price movements. Short-term traders that are actively managing their positions may be able to stay out of a position entirely until volatility subsides. In contrast, swing traders may not be available to adjust their position if they’re at work or asleep, leading to potentially significant losses. - Overnight Holding Risks Part of the issue with holding trades overnight is that they can gap up or down - opening much higher or lower than the previous day’s closing price, which could mean a stop loss isn’t triggered. This can result in large losses beyond what the trader was initially willing to risk. - Requires Discipline to Hold Trades Holding a position for several days or weeks can be tough for some traders. Intraday market movements may lead to impulsive decision-making, like closing a trade prematurely or taking a loss because of a perceived change in market direction. To weather these short-term price movements, swing traders must have the discipline to manage their emotions and only check the charts infrequently. Popular Tools to Use When Swing Trading A swing trader’s strategy will ultimately depend on their unique system for entering and exiting trades. There’s no right or wrong way to swing trade; the most important aspect is finding an edge over the market and achieving long-term profitability. Here are three common tools and indicators that can be used as part of a swing trading strategy. Channels Traders can use channels to take advantage of long-term price trends that play out over days and weeks. To plot a channel, you first need to identify a trending asset that’s moving in a relative zig-zag pattern rather than one with large jumps in price. Swing traders will often use the channel to trade in the direction of the trend; in the example above, they might look to buy when the price tests the lower line and take profit when the price touches the upper line of the channel. Moving Averages Moving averages are one of the simplest indicators, but they can help swing traders determine the direction of the trend at-a-glance. The options here are endless: - You could pair fast and slow moving averages (MAs) and wait for the two to cross; this is known as a moving average crossover. When a shorter MA crosses above a longer one, the price is expected to rise. Conversely, when a shorter MA breaks below a longer one, the price is supposed to decline. - You could stick with one and observe whether the price is above or below its average to gauge the trend. When the price is above the MA, it’s an uptrend; when it’s below the MA, it’s a downtrend. - You could use an MA as a support or resistance level, placing a buy order when the price falls to the MA in an uptrend and a sell order when it rises to the MA in a downtrend. In this equity swing trading example, we’ve applied the Exponential Moving Average (EMA) Cross indicator with a 50 and 200-period length in TickTrader. As you can see, it was valuable for identifying the direction of the S&P 500 over the course of several weeks and could have resulted in a profitable swing call. Fibonacci Retracements Lastly, many swing traders look to enter pullbacks in a larger trend. One of the most popular ways to identify optimum entry levels during these pullbacks is with the Fibonacci Retracement tool. Traders typically wait for a shift in price direction, then apply the tool to a swing high and swing low. Then, they enter at a pullback, usually to the 0.5 or 0.618 levels, to profit from the continuation of the trend. As seen above, this strategy can offer ideal entry points for swing traders looking to get in early before a trend continues. The Bottom Line In summary, swing trading can be an ideal style for many would-be traders out there. Rather than spending hours in front of the screen each day, swing traders can take a more laid-back approach. However, while solid risk management skills and iron-clad discipline are necessary characteristics for any trader, they’re even more important for swing traders. Ready to embark on your swing trading journey? You can try a free demo account with us at FXOpen to practise your skills and start building a strategy. Good luck! *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
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