7 – Forex Trading with Support and Resistance Zones

Support serves as a floor that inhibits any additional downward movement as illustrated in the diagram below:

Resistance behaves as a ceiling that prevents additional movement in the upward direction as shown below:

The indicators used for trading with this Pattern are the price action and their relationship with Support and Resistance.

What is Support?

Support is the stage that is very difficult for the price to fall under until it finally rebounds in an upward direction. It implies that a lot of traders are making trade decision at this stage.

 What is Resistance ?

Resistance is the stage that the price hardly moves above till it reverses and the price starts to move in a downward direction. Price always reverses at the support or resistance levels.

Steps involved in trading Support and Resistance Zones Pattern

The primary aim of trading with this pattern is to discover the support and resistance levels and apply it to your trade to enter trade and exit trades at suitable times. The steps involved are:

1. Draw the resistance and support levels on your chart

These levels enable you to easily identify the position where the price reversal may likely occur. While drawing the zones on the chart, try to do it on a larger time frame to allow you to readily estimate the key levels of reversal and the more significant points on the chart because a larger time frame helps you to see a better picture.

2. Identify support and resistance Zones

You need to wait for the price action to reach the Zone in order to set your charts on two to four currencies for instance, and wait for such opportunity because, it may take a while for the price to attain the support resistance levels. Choose a larger time frame to take less of your time and attention to discover.

3. Wait until the candle that touches the zone to close.

It is possible that the candle is the signal candle you are looking for. Try to figure out if it is a bullish or bearish candle; if it is a strong or weak candle; if it is large or small; and whether it has long wicks, small wicks or doesn’t contain any wick. Discovering the type of candle helps you to decide if you can sell short or buy long.

4. Decide your entry position

After analyzing the candle, the next thing you do is to determine your trade entry position.

Trend Trading in Forex ( Trading with an uptrend or downtrend )

Trend trading is a forex trading pattern that tries to make profits by analyzing forex movement in a specific direction. Forex traders who trade with this pattern, enters into a long position when a currency price is moving in upward direction. On the other hand, such traders take a short position when the currency moves in a downward direction.

Countertrend Trading in Forex ( Trading against the trend )

Countertrend trading pattern is a form of swing-trading pattern that presupposes that a present trading trend will rebuff. The trader tries to benefit from the turnaround. In countertrend forex trading pattern, the trader holds his position for many days or many weeks. Countertrend forex traders depend on graphs, indicators and oscillators like the relative strength index while making their trade decisions.

Countertrend trading can be utilized as a section of the diversification and risk-minimizing trading pattern.