Horizontal Support and Resistance Trading is a very popular forex trading system that is used by many traders worldwide.
To know how to use support and resistance trading effectively, you first need to know how to identify support and resistence levels.
How To Recognize Support & Resistance Levels
Its very simple to find support and resistance levels:
- Look at the chart
- Look for a series of low points where price does not fall below this any further, this is your support level.
- Look for a series of high points where price does not rise above this any further, this is your resistance level.
- The more price bounces off this support & resistance levels, the stronger these levels become
- So next time price comes this level, expect it to bounce again like it did before.
Thats pretty easy to understand, right?
Indicators: None
Timeframes: Any (Larger Timeframes like 1hr, 4hr & daily are much more reliable)
Currency Pairs: Any
Rules:
Buy Rules:
- Once a support level is identified, draw a horizontal support line and wait for price to fall back to that support line.
- (a)When price falls back and touches the support line, wait for the that candlesticks to close and place a buy stop order 2-5 pips above that high of the candlestick that touches the support line or (b) place a buy limit order so when price reaches it, it activates it and you are in a trade 0r (c) you can buy immediately at market price when price touches that level.
- for buy limit or at market orders, place your stops 10-30 pips below the support line.
- Take profit target levels should aim for the resistance levels above. Set them within the resistance levels so there is a greater chance of your profit target being hit.
Sell Rules:
- Once a resistance level is identified, draw a horizontal support line and wait for price to rise up back to that line.
- (a)When price rises back up and touches the resistance line, wait for the that candlesticks to close and place a sell stop order 2-5 pips below that low of the candlestick that touches the resistance line or (b) place a sell limit order so when price reaches it, it activates it and you are in a trade 0r (c) you can sell immediately at market price when price touches that level.
- for sell limit or at market orders, place your stops 10-30 pips above the resistance line.
- Take profit target levels should aim for the support levels below. Set them within the support levels so there is a greater chance of your profit target being hit.
Trade Management
- Consider closing half of your position off in profit when price travels to halway point between the support and resistance levels.
- move stop loss and trail stop your profitable trades to lock in profit as your trade moves in favour.
- the best way as usual, is to move behind those swing highs or lows and place your stops just a few pips behind so there is less chance of you getting stopped out prematurely.
Hope you liked this support and resistance trading system
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