Sunday 14 May 2017

How to trade forex support and resistance breakout

Market prices are always on the move in the market and what drive them are demands and supplies.
The high price from where price tends to go down is called resistance while the low price from where price tends to rise is called support.

Price action traders build their trading strategies around support and resistance levels.Most of them are able to trade creatively and successfully even by using naked charts.

Naked Chart Trading Strategy is simple to understand, powerful in action and reliable in returns.
It is the practice of trading without using the numerous technical indicators that abound on MT4 platform. This method is considered necessary due to the complex and lagging nature of the technical indicators.

Typical support and resistance are significant horizontal price levels.Such level is the clearest line on the chart which shows most significant value areas and it is drawn through the swing highs or swing lows on any time frame of any currency pair.

 The chart above shows a red horizontal line drawn through a swing high.The turning point where a rising price reverses and starts falling  is called "swing high." Every swing  high will remain a resistance until it is broken. A resistance becomes support once it is broken.
Resistance is a point at or around which bullish momentum ceases and bearish momentum springs up.

 The  diagram above  is EURUSD hourly chart. It shows that price was moving slowly and sideway below the resistance (red) line and later gained upward momentum which facilitated the collapse of the resistance.The resistance was tested and broken by price.The price broke through and rose strongly above the the purple swing high (the red circle indicates the breakout point). Historically,this move came in resonance with the activities surrounding the US presidential election in 2016.
It rose to as high as 1.1299.This is about 155 pips in few hours.

The support and resistance breakout strategey is a technique which works well and it upholds that traders are to buy above the swing high and set take profit at the next higher swing high.

The EURUSD chart above shows where I bought the pair and fixed my take profit level when I was using the breakout strategy.
In the event that you are new to forex trading and you wish that more light is shed on this post, please do not hesitate to send your email to me.


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