Support and resistance trading plays a major part in price action trading. Support and resistance lines are drawn on a chart to determine possible reversal points. If the price has reversed at a certain price level on the chart before, there is a possibility that it will reverse again at the same point when it returns to that price level.
The reason we draw support and resistance lines is very simple. If you have a support or resistance line drawn on your chart at a price reversal level, you can clearly see when the price gets to that level. If you are in a trade, you may want to get out at a support and resistance level as there is the potential for the price to reverse at that point.
The importance of support and resistance trading.
It is important to draw support and resistance lines on your chart when you are trading, as lots of traders pay attention to support and resistance trading, so it is often a good place to enter or exit a trade, as mentioned above.
Areas of support and resistance hold a great deal of information about which way the market will go when it hits a support or resistance line. Will it reverse at a support and resistance line or will it go right through. This is a major dilemma for many traders, and knowing what will happen at this point will make you a lot of money.
I discuss support and resistance trading at length in my Forex training course and i can give you the knowledge you need to predict with the highest probability what will happen when the price comes up to a support and resistance line.
For more information on my course please click on the link. Forex training course.
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What is price action Forex trading?
Many people ask me what is price action Forex trading. Price action Forex trading is a trading style that uses no indicators to determine movements in the Forex markets. One of the plus points of trading with price action is the fact that you have a plain uncluttered chart that is free from confusing indicators.
Many traders that use indicators can get bogged down with too much clutter on the charts which inhibits the view of the real thing that you need to focus on, and that is price. The majority of price action Forex traders, trade a clean chart, with maybe one or 2 moving averages on, and a few support and resistance lines. This is the way most professional Forex traders trade the markets, so it makes sense to do the same.
When you have an understanding of price action Forex trading you can predict with high probability what is going to happen next to price. This gives you an edge over Forex traders that use indicators, as generally by the time the indicator has given them a signal to enter a trade, the trade is already over.
Many traders look for confluence to give them a trading signal. Confluence (in case you have not heard of it before) is when multiple factors come together to give a signal to trade. For example if the price is coming up on a support or resistance line, and you also have a trend line that meets at the price point, that is an area of confluence. Now a lot of traders make the mistake of loading the chart with indicators in the belief that the more indicators you have, the more confluence you will have. This can work some of the time, but its not a reliable way to trade. I explain all about why this type of trading does not work in my Forex training course.
This is not confluence this is confusion.
You can see from the above chart the confusion caused by loading your chart with indicators. You don’t need indicators on your chart to be able to trade correctly. The only thing you need to look at is price. So now when someone asks you what is price action Forex trading you can now tell them. Its what you need to learn in order to be a successful Forex trader.