How to Determine Support and Resistance Areas
Determining support and resistance areas is difficult for any forex trader, this is because they mark the locations where prices are most likely to experience significant movements. Here are some ways the Wijaya Trading version determines the support and resistance areas which will be discussed briefly:
1. High-Low Visuals
If the trader's goal is to find a really strong support or resistance level, the first step should be to see if there are high and low price points that can be drawn in such a way as to form a horizontal line.
The rules are:
· If the price fails to break a newly formed low, that level is a swing high and acts as resistance
· If the price fails to break a newly formed low, that level is a swing low and acts as support
2. The Angle Forms a Confluence Between Buy and Sell
Support and resistance levels can be recognized reversal points, areas of compression or psychological levels (round numbers that traders observe). The higher the timeframe, the more relevant the levels will be.
Finding the most can take hours of practice. These levels arise due to the confluence of buyers and sellers at a key meeting. The fact that these levels swap roles between support and resistance means they can be used to determine the range of a market, trade reversal, bounce, or breakout. Each trader will have their own rules for entering and exiting.
3. Rejection or Axis
Rejection is a price action setup which indicates that the price will reverse from its original movement. Rejections are generally candlesticks that had broken through a level or area but were rejected by the market so that the candle closed with a long wick or tail. The longer the tail shaped, the more likely a reversal will occur.
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