How to Use Support and Resistance for Big Profits

By. Monica Hendrix


An essential element of your forex trading education is using valid support and resistance to time your trading signal.

Support & Resistance is very valid because there have been so many tests. Resistance or Support gain validity.

- The more times they are tested and hold.
- The more different time frames and the wider apart they are.
- The traders who trade the market and the news sees the level as significant,

1. Watch the level then confirm the Trade
The way to trade it is to wait for the rise but DON'T sell until you see momentum turn down and two great indicators for timing your trade are the stochastic and the Relative Strength Index. Simply wait for the level to be tested and wait for them to turn down.

2. Never just assume a level will hold, wait for confirmation via momentum indicators
Once this occurs you can be short and you know when you're wrong - if prices close above resistance. This simple method of trading into valid resistance or support works and providing you time your entry correctly with momentum indicators, it can make a lot of money.

We have used this simple strategy to clear thousands of pips profits, this year and we have kept it simple, nothing complicated about it but it doesn't mean it simple strategies can't make money they can.

While resistance holds you keep doing it sell into the level and take profits when the dollar becomes oversold, then wait for the next test.

3. Follow Reality of Price Change
If the price breaks up and closes strongly above resistance, the odds will favour further strength in the dollar.

4.Simple and Effective
Sure it's simple but it can be very profitable and the above is a good example of a low risk, high reward way of trading into valid resistance.

You don't need to do anything else, than trade the reality of price change on the charts and if you do and you confirm your moves this simple forex trading strategy can make a lot of money.


Related Post :

1. How To Use Fibonacci Retracements In Your Trading
2. Using Fibonacci Retracements with Support & Resistance
   

Source :

1. Forex Trading Education - How to Use Support and Resistance for Big Profits

Using Fibonacci Retracements with Support & Resistance

By. Andrew Shiveley


One of the essential principles of applying technical analysis to forex trading in a profitable manner is that you want to see multiple confirmations for an entry point before you actually enter the market.

If you are making trading decisions based upon prominent candlestick formations on a long term chart, it would also be wise to check with a number of other indicators when you get a buy signal in order to make sure that there are no contradictions. In this article we are going to focus on how Fibonacci retracement levels coincide with support and resistance levels, and how you can use these two different technical indicators in conjunction with each other in order to yield accurate market entry signals.

Fibonacci retracements are based on the number 1.618 (also called the Golden Ratio) that is found in all natural orderly systems from flowers to the human body to the financial markets. Over the years it has been proven that when the price of a currency pair has a large move and then retraces back in the direction of the previous value, it is statistically more likely to rebound at the levels of 38.2%, 50%, and 61.8% of the original price move.

The way that many traders use Fibonacci retracement levels is to determine when to enter and when to exit the forex market. A Fib retracement can give a buy signal when the price hits one of the three Fib values and then rebounds, or it can show that the market is 'running out of steam' and it is time to exit when the price approaches one of the three Fib values and then falls. While Fib levels can be excellent indicators, it is never wise to enter into a trade based on these values alone.

Support and resistance levels are pretty much exactly what they sound like: Support levels are the price values below the current price data that the market will tend to rebound off of, and resistance levels are exactly the same except they are above the current price data. Support and resistance levels can offer strong forex entry signals when the price breaks through an established level, as when this happens the price has a tendency to continue moving in that direction.

S&R levels and Fib retracements are both powerful trading tools individually, but when you combine them together the trading signals become much stronger and more reliable. As mentioned above, a Fib retracement can give a strong market entry system when the price retraces a given movement and then switches direction around one of the three main Fib values.

As a general rule of thumb when trading the forex market, the longer time frame of a chart, the more reliable the trading signals that are generated. So if you happened to be looking at a 4-hour or 8-hour chart and you saw a strong Fib retracement signal, the way that you could confirm this signal using support and resistance levels is to see whether the Fib value is also a predominant S&R level.

If the price bounces off the S&R level, this is not as strong an indication for market entry as when the price passes through an established level, because once the price crosses an established support or resistance level then it has a tendency to continue moving in that direction.


Related Post :

1. How To Use Fibonacci Retracements In Your Trading

Source :

1. Using Fibonacci Retracements with Support & Resistance Levels in Forex

How To Use Fibonacci Retracements In Your Trading

Written by Wayne McDonell, Chief Currency Coach FxBootcamp

Leonardo Fibonacci studied ratios. He should have been a forex trader. We use his ratios to study pull-backs on all time frames; from 1 min to monthly charts and everything in between.

What’s a pull-back? It’s a retracement of price from the direction of your fundamental bias. Let’s say you are bullish on a particular currency pair. In this case, your fundamental bias is up. The definition of an up trend is a series of higher highs and higher lows. Therefore, by definition, price WILL fall in a rising market. How far price falls is important.


I use Fibonacci studies to measure these pull-backs. My ideal pull-back only retraces 38.2-61.4%. If red candles turn green in this zone, I become bullish again and look for opportunities to buy.

Below are some examples from today.

Figure 2 is the CAD/JPY 4 hour chart. After rising back to the 200 EMA, the long term lagging indicator I use to judge “fair market value”, price begins to drop. If I were bullish on this pair, I’m happy to see it drop. I like to buy when price is low.


How to enter a Fibonacci Trade

Step 1: Measure the distance between the swing high and low.
Step 2: Wait for price to fall. You can trade while it falls, but I prefer to only trade in the
direction of my fundamental bias.
Step 3: If price falls into the “fib zone” of 38.2% - 61.8%, get ready.
Step 4: If price turns green, you may consider going long again. Use of moving averages and
oscillators are further levels of confirmation.


Figure 3 offers a great example. There are two large bullish engulfing candles that formed on the psychological level of 1.4600. This represents a nice reversal. However, the “long opportunity” is not created at that bounce.

If an uptrend is a series of higher highs and higher lows, we don’t have all the pieces in order yet. All we have is a new higher high. The conservative tactic is to not go long after you see big green candles. The tactic is to buy the pair after a high low has been created. This is especially attractive to see that higher low for exactly 61.8% from the swing high.


The next example from today was on this EUR/JPY 1 min chart. I have illustrated a 50% fib retracement. It’s a normal occurrence and happens dozens of times per day. However, can you see any other Fibonacci retracements in this example? Look at all the little swing highs and lows. I bet you can find plenty of reasonable setups.

In the video, you will see how I set up Fibonacci retracements for trade opportunities in the live market. Remember, if you are going to practice this methodology, do so on a demo account and do not trade real money until you have a track record of success.

Source :

1. How To Use Fibonacci Retracements In Your Trading. Friday, 14 November 2008 15:11:53 GMT.

ECB Expect to Cut as Price Pressures Alleviate

Written by David Song, Currency Analyst
Friday, 14 November 2008 11:00:14 GMT

(www.dailyfx.com - click image to enlarge)

Fundamental Headlines

1. Citi to Cut More Jobs, Raise Rates on Its Plastic – Wall Street Journal
2. Chances Are Slim for Stimulus, Auto Aid Till '09 – Wall Street Journal
3. New wave of CDOs at risk of default – Financial Times
4. Nomura Said to Plan Job Cuts Among Ex-Lehman Staff – Bloomberg
5. Shareholders Pay Price as Barclays, UniCredit Raise Capital Like "Casinos" – Bloomberg
6. Sun Microsystems Plan To Cut Jobs - RTTNews
   

EURUSD – The Euro-Zone is facing its first recession in 15 years as the advanced GDP reading for the third quarter showed that the economy contracted another 0.2% from the previous quarter.

1. Germany, the largest economy in Europe, fell into a recession for the first time since 1996.
2. Italy, the third largest economy in the Euro-Zone, is facing the worst recession since 1992.
3. Fears of a deep and prolong recession may lead the European Central Bank to lower the benchmark interest further as growth prospects deteriorate, and may continue to ease policy well into the next year as price pressures alleviate.
4. The headline inflation reading for the Euro-Zone fell to 3.2% from 3.6% in September as food and energy costs continue to pullback from their record highs.
5. Prices pressures in Germany cooled for the third consecutive month in October as the final CPI reading showed that the headline reading slipped to 2.5% from 3.0% in September.
6. Falling commodity prices paired with the drastic slowdown in the economy has certainly helped to lower inflation, which should allow the European Central Bank to hold a dovish outlook over the near-term. As price pressures weaken further, the ECB may cut borrowing costs well into the next year in order to avoid a severe recession.
7. Meanwhile, Credit Suisse overnight index swaps are showing that investors expect the central bank to the interest rate by at least 100bp over the next 12 months, which could drag on the euro going forward.

(www.dailyfx.com - click image to enlarge)

Source :
1.ECB Expect to Cut as Price Pressures Alleviate, Friday, 14 November 2008 11:00:14 GMT.

Weekly Jobless Claims Jump To Seven-Year High

First-time claims for unemployment benefits showed a substantial increase in the week ended November 8th, according to a report released by the Labor Department on Thursday, with the increase lifting jobless claims to their highest level in over seven years.

The report showed that jobless claims rose to 516,000 from the previous week's revised figure of 484,000. Economists had expected jobless claims to come in nearly unchanged compared to the 481,000 originally reported for the previous week.

With the increase, jobless claims rose to their highest level since the weeks following the September 11th attacks. In the week ended September 29, 2001 jobless claims totaled 517,000.

The Labor Department also said that the less volatile four-week moving average rose to 491,000 from the previous week's revised average of 477,750. The increase lifted the four-week moving average to its highest level in over seventeen years.

Last Friday, the Labor Department released a separate report showing that employment fell for the tenth consecutive month in October, driving the unemployment rate up to its highest level in over fourteen years.

The report showed that non-farm payroll employment fell by 240,000 jobs in October following a revised decrease of 284,000 jobs in September. Economists had expected a drop of about 200,000 jobs compared to the decrease of 159,000 jobs originally reported for the previous month.

Continued job losses in manufacturing, construction, and several service-providing industries contributed to the bigger than expected decrease in employment.

The Labor Department also said that the unemployment rate jumped to 6.5 percent in October from an unrevised 6.1 percent in the previous month. With the increase, the unemployment rate came in above estimates of 6.3 percent and rose to its highest level since March of 1994.

With October marking the first month of the fourth quarter, the steep drop in jobs is likely to add to expectations a continued contraction in GDP during the quarter following a modest 0.3 percent contraction in the third quarter.

A recession is technically defined as two consecutive quarters of negative growth.


Related Post :
1. Worried About Your Job, What Sector a Risk?

Source :
1. RTTNews : Weekly Jobless Claims Jump To Seven-Year High, 11/13/2008 9:12 AM ET.