By: Michael A. Jones
Support and resistance is such a powerful Forex signal that without understanding its impact on the market, a trader will probably never master the skills necessary to make profits on a consistent basis.
This Forex signal simply registers where price reached a peak or a low. On a higher time frame these price levels can have huge significance. Why?
Getting Behind The Scene
We need to understand what is going on behind candle patterns and price movements. Imagine thousands of traders coming to their desks each day all around the world and processing orders involving billions of dollars worth of currency.
The price at which they bought the currency now represents a key level for them. They do not want to see price go in the opposite direction or they will be at a loss. So what happens? They do everything possible to protect that price level.
The daily chart is of particular importance when considering support and resistance as a Forex signal. Traders associated with big institutions often refer to the daily chart rather than lower time frames. So price highs and lows on a daily chart can represent key, strategic price levels.
If price reached a high within the last few days, you can be sure a number of traders have millions or even billions of dollars worth of currency tied up at around that level or below it. For price to go above that high there is going to have to be considerable buying pressure from the bulls. Obviously the converse is true when price reaches a new low.
So look at the higher time frames like the daily, and 4 hour charts and identify these key levels of support and resistance. They form a major Forex signal.
[Read full article]
This Forex signal simply registers where price reached a peak or a low. On a higher time frame these price levels can have huge significance. Why?
Getting Behind The Scene
We need to understand what is going on behind candle patterns and price movements. Imagine thousands of traders coming to their desks each day all around the world and processing orders involving billions of dollars worth of currency.
The price at which they bought the currency now represents a key level for them. They do not want to see price go in the opposite direction or they will be at a loss. So what happens? They do everything possible to protect that price level.
The daily chart is of particular importance when considering support and resistance as a Forex signal. Traders associated with big institutions often refer to the daily chart rather than lower time frames. So price highs and lows on a daily chart can represent key, strategic price levels.
If price reached a high within the last few days, you can be sure a number of traders have millions or even billions of dollars worth of currency tied up at around that level or below it. For price to go above that high there is going to have to be considerable buying pressure from the bulls. Obviously the converse is true when price reaches a new low.
So look at the higher time frames like the daily, and 4 hour charts and identify these key levels of support and resistance. They form a major Forex signal.
[Read full article]
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