Working out support and resistance is so important, especially if they are key supports or resistance areas on the four hour or daily charts. So how does one work them out. Below is a step by step guide on the process of working out where the next key support is so you can buy and where the next key resistance is so you can sell.
This guide is for the four hour and daily time frames that way there is less key areas to define, thus making them the strongest areas of all trading.
Why Would One Want to Know Strong Support Areas and Strong Resistance Areas?
The reason one would want to know this is because with these areas outlined you can make better decisions on where to buy, where the market will turn and where the market will resist and sell.. Thus you will make more money. In fact by trading off only the key support areas you are definitely on the road to the most successful form of trading. This form of trading is called price action trading and you will see it in action below in the images to see how it works and how it can help you in your next important trade.
“Did you know that in Forex history repeats itself over and over..? That is why using the crucial supports and resistances on charts such as the 4 hour and daily are crucial in this business..”
4 Hour Strong Support and Resistance
This is a good example of trading the GBP / USD par this week on the 4 Hour Chart. You will see strong resistance at 1.5960 area and a strong support at 1.5820 area. The strong support used for buying and the strong resistance used for selling. Please note, you must put stop loss at previous high area on the daily chart in order to keep the trade active and safe. This weeks previous high stop loss is at 1.6075 area.
Daily Strong Support and Resistance seen on the Daily Chart for GBP / USD
Selling – On the daily you will notice the resistance and support areas more easily. As you will see for selling a good stop loss area is 1.6075 and a good take profit area is 1.5825. The opening for this trade is made once it passes 1.5960 to 1.5970 area and the starts to drop. This is a good sell spot.
Buying – For buying wait until it goes to 1.5820 area and then buy as it retracts back up. The stop on a buy here would be below previous support which is 1.5760.. A good take profit is 1.5960..
I hope that helps you all identify high probability Forex Trades by identifying strong resistances and supports, if you have any questions please comment below.