Can anyone explain resistance and support? | Forex Factory

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Can anyone explain resistance and support?

  • #1
  • First Post: Feb 6, 2009 10:56pm Feb 6, 2009 10:56pm
Hi,

I'm little new and learning forex systems now. I would like to know how do we use resistance and support? What is the purpose of them?

Thank you very much.
  • #2
  • Feb 7, 2009 6:44pm Feb 7, 2009 6:44pm
Hi,

There are many things to be learned by watching and studying support and resistance.

Support and resistance can be different things to each trader.
They can be highs and lows in price.
They can be pivot points,
fibonacci levels,
psychological levels...etc

Support and resistance can be used in several ways as part of your trading strategy. A couple of ways, (and this is not to say that these are the only ways) such as a location to take profits or they can be used as places to enter a trade as in a bounce/ reversals off of support or resistance.

You can also use support and resistance as places to identify where most stop loss levels might be.

Another thing to consider is that support and resistance can appear on any time frame. What might seem significant on a large time such as a daily or 4 hour chart, might not be too important on a smaller time frame.
It is more important how YOU plan to use support and resistance.

It should all be considered when you create your trading plan.
Specifically...

  1. What time frame are you going to use when you trade?

  1. Are you comfortable trading in the opposite direction when the rest of the market is mostly in one direction? (you would do this if your analysis indicates a possible bounce or change in direction)

It is really easier to understand support and resistance when you use it and having a trading strategy will point out how you will apply these levels to your trading.

It would help if you could share with us your style of trading and perhaps we could point out a few things to look for in regards to the support and resistance levels and how we use them.

L.C.

  • #3
  • Feb 8, 2009 7:22am Feb 8, 2009 7:22am
I am no expert here, still a rookie, but there is a great thread here that if you read it will answer many questions specifically related to resistance/support. It is a long thread but you will find many of your questions answered within the first 100 pages.


Bob





http://www.forexfactory.com/showthread.php?t=2331
  • #4
  • Feb 8, 2009 7:26am Feb 8, 2009 7:26am
You should run a few times across babypips.com and there wouldnt be a need to ask such question.
  • #5
  • Feb 8, 2009 4:19pm Feb 8, 2009 4:19pm
I know of some good sources of information on just trading off "horizontal levels" also known as resistance and support as well as pure price action trading. Send me a private message if you want more information. Good Luck!
  • #6
  • Edited 8:04pm Feb 11, 2009 12:48am | Edited 8:04pm
Here is a nice example of my trade just recently; GBP/USD.. i just got home and caught this unexpectedly.

Broke right through my support, it was bouncing up and down off my support/resistance lines... I have an audio alert of me personally screaming " GET THE #$ TO THE COMPUTER ! SOMETHING IS UP!" I work strictly from a 5 min timeframe.

Scored a nice 75 pips, paid for that laptop I just bought my wife tonight

Attached Image (click to enlarge)
Click to Enlarge Name: supportresitey1.jpg Size: 153 KB

http://img156.imageshack.us/img156/s...pg/1/w1360.png
lowest draw down possible please.
  • #7
  • Feb 11, 2009 6:44am Feb 11, 2009 6:44am
The problem is that everyone sees different support and resistance in the same chart...

there is no such thing as objective support and resistance.. thus the inacurance of the results.
Why do we fall? "So we can learn to pick ourselves up."
  • #8
  • Edited 8:06pm Feb 11, 2009 6:49am | Edited 8:06pm
Quoting ehrek
Here is a nice example of my trade just recently; GBP/USD.. i just got home and caught this unexpectedly.

Broke right through my support, it was bouncing up and down off my support/resistance lines... I have an audio alert of me personally screaming " GET THE #$ TO THE COMPUTER ! SOMETHING IS UP!" I work strictly from a 5 min timeframe.

Scored a nice 75 pips, paid for that laptop I just bought my wife tonight
Attached Image (click to enlarge)
Click to Enlarge Name: supportresitey1.jpg Size: 153 KB


http://img156.imageshack.us/img156/s...pg/1/w1360.png...


According to the shadows of some previous candles, it broke support some times and you did not enter the trade that time...

Just wondering what made you enter that last trade, if it could easily be a fake signal like the previous ones and closing as a shadow?
Why do we fall? "So we can learn to pick ourselves up."
  • #9
  • Feb 11, 2009 7:28am Feb 11, 2009 7:28am
I particularly like the look of that trade because of the bullish reversal candle that failed on the support level. Entry on the break of the low of that candle was high probability, low risk and had great potential for a fast and hard breakout. The reversal candle was the last of the buyers being eaten up by the sellers at that clearly defined support level and there was likely to be an abudance of sell stop orders below as the definition of a down-trend was fulfilled. The failure of the reversal candle is a great indication that buyers are exhausted and consumed by the weight of sellers at that price, and as the reversal candle appeared upon it, the support level had just demonstrated that it still had significance and was being closely watched by market participants. You've got context, trend, price action and an entry signal - if you've got the courage to take a trade there, money in the bank too.
  • #10
  • Feb 11, 2009 10:45am Feb 11, 2009 10:45am
Breakout time? Rain perhaps?
Attached Image
The breaking of a wave cannot explain the whole sea.
  • #11
  • Feb 11, 2009 7:49pm Feb 11, 2009 7:49pm
Quoting ForexDude
According to the shadows of some previous candles, it broke support some times and you did not enter the trade that time...

Just wondering what made you enter that last trade, if it could easily be a fake signal like the previous ones and closing as a shadow?

When you talk support and resistance, you look for "areas" or "levels" . Don't get hanged into a specific price. Therefore, shadows are not very significant.

"This ares is holding" "This level is holding".
  • #12
  • Feb 11, 2009 8:12pm Feb 11, 2009 8:12pm
Quoting Craig
Breakout time? Rain perhaps?
Simply the best image i have ever seen, fantastic
  • #13
  • Feb 11, 2009 9:30pm Feb 11, 2009 9:30pm
http://www.investopedia.com/articles...cal/061801.asp

http://www.forexfactory.com/showthread.php?t=86429
  • #14
  • Feb 11, 2009 10:19pm Feb 11, 2009 10:19pm
Quoting wiztrader
When you talk support and resistance, you look for "areas" or "levels" . Don't get hanged into a specific price. Therefore, shadows are not very significant.

"This ares is holding" "This level is holding".

Ok, but I don't understand why he didn't enter at the previous candle.
Why do we fall? "So we can learn to pick ourselves up."
  • #15
  • Feb 12, 2009 4:03pm Feb 12, 2009 4:03pm
Quoting ForexDude
Ok, but I don't understand why he didn't enter at the previous candle.
- I entered the trade at a later time to make sure 100% it has broken my support level, this gives me a high probability and sucess rate and avoids whiplash. I like to be certain.

I love consolidated boxes, i call them tiers, I set my boxes up and call them TIER 1, TIER 2, etc and wait for nice breakouts.

Yesterday, the gbp/usd broke my support nicely @ 1.43543 and I netted a good 160 pips before executing a close order.


Cheers!
lowest draw down possible please.
  • #16
  • May 11, 2009 12:47am May 11, 2009 12:47am
I'd like to add my penny [sorry if it's all already said ]
Base for S/R level is in my opinion reasoning: "If last time price bounced from this point, why should this time be different?" In other words, what is a guarantee that this time there will be a singe buyer over this level? [when big player enter position, must be sure, someone buy it back when price will rise a bit].
  • #17
  • May 11, 2009 2:29am May 11, 2009 2:29am
Quoting momo11
Hi,

I'm little new and learning forex systems now. I would like to know how do we use resistance and support? What is the purpose of them?

Thank you very much.

Check out Sam, he discusses S/R from a Supply / Demand perspective.

http://www.fxstreet.com/search/contr...1-e9bf77216d2f
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #18
  • Last Post: May 11, 2009 7:28pm May 11, 2009 7:28pm
Quoting momo11
Hi,

I'm little new and learning forex systems now. I would like to know how do we use resistance and support? What is the purpose of them?

Thank you very much.

Well, as mentioned you really need to study at baby pips to get the basics under your belt. That said, it was a valid request you made and some of the replies to your query are somewhat less than hospitable.

Check this short thread out.
http://www.forexfactory.com/showthread.php?t=166547
Starting to see instead of just looking.
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