When it comes to trading Forex charts, nothing is as rudimentary and vital to success as identifying and using support and resistance. Throughout any trader’s career, the proper use of these levels will always be incredibly important, otherwise things can go very wrong very quickly. Therefore, taking the time to learn how to use these levels properly will create many different trading opportunities for all types of traders. While some forms of support and resistance can be broken quite easily, others can hold out for months or even years. Being aware of where these levels are after they have been identified can provide many opportunities to predict the direction of price action, giving traders the opportunity to make significant profits.
Support and resistance levels are identified when price action reaches a high or low on any chart, whether it is a 5-minute or a 1-day, there is an opportunity to identify points of support and resistance. When support or resistance points are identified outside of the channel that has been established throughout the trading week, it is generally a safe bet to go ahead and anticipate a bounce off that level. By not correctly identifying these levels, someone can end up getting into trouble if things go wrong, and they often do when trading just this indicator. While support and resistance are great tools that should never be underestimated, it is very important to remember that they are best used in combination with other methods.
While each part of the trading picture should not be taken as gospel, when combined they can give the trader real-time insight into the odds. When more than one indicator comes together to signal a buy or a sell, it’s time to consider that direction, but waiting too long for the stars to align can result in missing the boat. So make sure everything is in place so you can properly assess what your chances are before moving forward, otherwise things can get very difficult very quickly. Other indicators like pivot points and Fibonacci levels can make a big difference when trying to figure out what is possible, and this keeps everything in a bird’s eye view for a trader. While having all of your tools is a vital step in becoming a successful trader, there is also something to be said for knowing how and when to combine them.