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Hi there,
Once in a while, i get questions asking me why was a support respected when it was 1.4718 instead of 1,4719.
I would like to address this common misconception today.
Firstly, what are resistance and support lines?
When viewed on the chart, these are areas whereby the price seems to bounce off.
From a market point of view, these are areas whereby traders feel that enough is enough. ” I will not buy more at this price as it is too costly” ( Resistance Line ) or “I will not sell any further as this is too cheap” ( Support line )
For example, we note a support line at 1.4719.
However, there may be folks who are more stringent and will not sell lower than 1.4725 or perhaps we have folks who are easy going and are willing to sell as low as 1.4715.
This effectively “spreads” out the effect of the line.
This can be one of the reasons why we usually see the price slow down and consolidates when approaching an area of support or resistance as various expectations are being filled.
Another point i would like you to note is that forex being a decentralized market, will usually not have a standard price across all brokers.
If you whip up two charts from different brokers, you will probably see a difference of a few pips.
This contributes to the concepts of resistance and support lines being areas rather than a single line as what may look like 1.4719 to you, maybe 1.4721 to another.
Lets refer to the chart above. It shows the EUR/USD bouncing of a resistance at 1.4951 and later a support at 1.4910.
Notice that the price did push beyond the lines on a few occasions.
Therefore, it may not be feasible if one sets stop loses right on the line as the above example would have triggered your stop loss, just to turn back in your favor moments later.
That’s all for now and i hope i have shed light on how resistance and support lines work.
Trade safe.
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Tue, 21th of April, 2009
By Setyo Wibowo (analyst@fxinstructor.com)
EURUSD Outlook
The EURUSD had another bearish momentum yesterday. After break below key support level at 1.3000 – 1.2950, the pair bottomed at 1.2888 and closed at 1.2919. The descending triangle pattern has been giving us a valid bearish scenario so far and I am still expecting further potential bearish movement towards 1.2456 this week. The bias remains bearish in nearest term but we seem to have support around 1.2840/50 area. Break below that area could trigger further bearish momentum targeting 1.2725 area. CCI in oversold area and heading up on h4 chart so watch out for a potential upside rebound testing 1.2950/70 resistance area. Break above that area could trigger further upside correction.
EURUSD Daily Supports and Resistances:
- S1= 1.2855
- S2= 1.2792
- S3= 1.2696
- R1= 1.3014
- R2= 1.3110
- R3= 1.3173
GBPUSD Outlook
The GBPUSD continued it’s bearish momentum yesterday. After violated the trendline support on h4 to the downside, the pair bottomed at 1.4499 and closed at 1.4536. The bias is bearish in nearest term targeting 1.4420 area. However CCI in oversold area and heading up on h4 chart so watch out for a potential upside rebound testing 1.4575 resistance area. Break above that area could trigger further upside correction.
GBPUSD Daily Supports and Resistances:
- S1= 1.4420
- S2= 1.4305
- S3= 1.4111
- R1= 1.4729
- R2= 1.4923
- R3= 1.5038
USDJPY Outlook
The USDJPY had a bearish momentum yesterday. The pair bottomed at 97.65 and closed at 97.87. On h4 chart we can see that the triangle formation has been violated to the downside. The bias is bearish in nearest term targeting 97.10 area. However CCI just cross the -100 line up om hourly chart so watch out for a potential upside rebound testing 98.10 resistance area. Break above that area could trigger further upside rebound.
USDJPY Daily Supports and Resistances:
- S1= 97.88
- S2= 96.89
- S3= 96.14
- R1= 99.62
- R2= 100.37
- R3= 101.36
USDCHF Outlook
The USDCHF attempted to push higher yesterday. The pair topped at 1.1739 but closed lower at 1.1689. On daily chart below we have a shooting star candlestick pattern suggesting a potential bullish exhaustion and a warning of bearish reversal. The bias is neutral in nearest term. Immediate resistance is seen at 1.1750. Initial support at 1.1620. CCI just cross the 100 line down on h4 chart suggesting a potential downside pressure.
USDCHF Daily Supports and Resistances:
- S1= 1.1644
- S2= 1.1602
- S3= 1.1555
- R1= 1.1733
- R2= 1.1780
- R3= 1.1822
Have a great day!
Most strategies or techniques in technical analysis involve the use of indicators.
But more often than not, most traders use indicators for all kinds of situations which tend to render them quite ineffective.
Just as a carpenter’s toolbox has different instruments which are used for different purposes, each indicator in the tool box of a trader has to be used for a particular situation.
In our Live Trading Room we teach, among many other things, a series of lessons we call “Know your Indicators”, which introduce specific indicators, and go over the characteristics and drawbacks of the same.
First and foremost, there is one point that a trader needs to keep in mind – all indicators are lagging, and it is ultimately price which is the only leading indicator.
Indicators should be used just as they are described – as “indications” for price movements and not as confirmations. While this does not diminish the importance of the indicators, one must remember that a change in price will cause a change in the indicator – not the other way round.
Indicators, nevertheless, play an important part in the building of strategies and techniques – but only if one applies them correctly.
The DMI/ADX is one of the most effective and yet underused indicators. If used with the correct parameters, it can be a very effective trading system on its own. Read the rest of this entry »
Hey Traders,
This is the third episode of our Secrets of MetaTrader video series. Today’s lesson is dedicated to installing indicators on your MetaTrader 4 platform, without having to dig around on your “C” drive looking for the right folder.
We’ve had A LOT of requests for something like this, so I hope you all find this extremely helpful and effective! If you ever need to install indicators manually, this is the recommended way.
Let me know if you have any questions or comments, and enjoy the video!
Hey Traders,
Welcome to another episode of Secrets of MetaTrader. Its been a while since we posted another update, but it was surely worth the wait.
Our second lesson discusses duplicating objects on your charts – something many traders can find very useful when plotting channels, Andrews Pitchforks, etc.
Another topic in today’s video is stacking indicators – placing one indicator on top of another in a separate indicator window. This is a very versatile feature that many traders ignore because they don’t know about it.
Let me know if you have any questions or comments, and enjoy the video!
In the forex markets, it’s worth knowing the characteristics of the currency pairs, since each of them exhibit distinct identities.
Most of the currencies exhibit similar movement patterns, which can help a trader confirm price movements.
One such close relation can be found between the EUR/USD & USD/CHF.
The price movements of these two currency pairs are absolute mirror images.
In short, they have an inverse relationship: If EUR/USD is rallying, then USD/CHF should have downward movement, and vice-versa. Read the rest of this entry »
Confirming the long term trend of a particular instrument with another correlating factor only increases the probability of a profitable trade.
We are attempting a predictive write up here, since there are similar patterns developing in EUR/USD and Spot Gold.
As of today, the overall situation seems to be favoring the Us Dollar, as the technicals are indicating some respite from its recent downfalls.
This may not necessarily be a reversal, but we can certainly expect a retracement of the US Dollar to the upside.
Let’s first have a look at the close relation between the movements of EUR/USD and Spot Gold.
Read the rest of this entry »
Many scoff at the idea of “Forex for a Living”.
The disbelief in this idea is further encouraged by tales of trauma received by many an unfortunate trader. We have all heard the horror stories, the tragic accounts of so-called “newbies”, and are tempted to dismiss the idea of trading for a living right off.
On the other hand, we have success stories.
Traders come forward to say – “Yes, it’s very possible! Look at me, I live off my trading.” Some people who read or hear such talk say, “I think he’s a dirty liar!”. They think, “If he has money, its because he was rich before – it wasn’t trading that made him so!”, or “I don’t know how much he lost before he made a profit.”
Read the rest of this entry »
The Pivot Point System is a technique developed by floor traders, to help ascertain where the price is relative to previous market action. It can be classified as a technical indicator derived by calculating the numerical average of the high, low and closing prices, of any currency / index / stock etc.
A look at market movement tells us that price always fluctuates between a level of support and a level of resistance. Properly identifying key support and resistance levels can improve the ability to enter, exit, and manage your trades.
The pivot point is a level at which the sentiment of the market changes. It can tell us where the sentiment of traders and investors changes, from bull to bear or vice versa.
The main advantage of this technique is that it is price-based as opposed to indicator-based. By the time most indicators generate a signal, the move is already well under way. By following this system, one can get into a trade before the indicator-following traders, and be well into the trend when a signal is just being generated on a stochastic or other oscillator.
In its basic interpretation, we can say that if the market breaks the Pivot level up, then the sentiment is said to be a bull market and it is likely to continue its way up, on the other hand if the market breaks this level down, then the sentiment is bearish, and is expected to continue its way down.
Also at this level, the market is expected to have some kind of support/resistance, and if price can’t break the pivot point, a possible bounce from it is plausible. Read the rest of this entry »
Here at FX Instructor we like try to try new things on for size now and then. In our Live Trading Room, I’ve seen countless times how people spend months, even years trading without knowing various shortcuts and tricks that could save them time and free their attention to focus on what really matters – trading!
So, this inspired me to start a new video series, “Secrets of MetaTrader”, which I hope will open the eyes of many traders out there who are still not getting the most out of the MetaTrader 4 platform. Eventually I hope to expand the series to other platforms as well.
Our first lesson deals with putting price levels next to the Fibonacci Retracement lines – one of the most commonly ignored features that MetaTrader provides.
Let me know if you have any questions or comments, and enjoy the video!
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