Way of the S/R levels

Hi All,

After having read several items on Forex, I started trading in August 2009. Long story short, I went from loosing 10 pips to a max of 80 pips and now I am basically at the point where I can only trade certain the AUD/USD, or the USD/JPY due to the low funds available in my account.

I want to learn and I want to succeed. I am unwilling to give up and hopefully one day soon I do succeed. With this thread, I hope to start anew and learn to draw Support and Resistance price levels. I hear that this will be very beneficial among other things in my forex adventure.

So with that introduction, I hope to post on my S/R levels and hope that others assist me in this endeavor.

Thank you All.

Here is a 4 hour chart of AUD/USD where I just drew up some S/R levels.
The red levels are ones that I feel confident about. The yellow S/R level I am not too sure of.

The reason I decided to include the yellow S/R level was because there were no full bars that closed above the level during it's peak on October 15.

What does everyone else think?

Graph drawn on October 20, 2009

Hi bmenoy,

You're almost in the same situation as me. I suggest that you read PeterFMs great thread This is my way of helping Newbies and that you stick to one pair only until your trading is profitable in a consistent way.

Good luck!
beam

Some will disagree, but I suggest you move down to a lower time frame. I prefer the 5m and 1m.

Yeah, you're right, I do disagree.

Stay on daily time frame until you learn the psychological aspects of trading. I, and many other newbies, did it the other way and got killed.

beam

Perfectly fine. Time frames less than 30 minutes aren't for everyone, but they're the time frames I prefer and am most successful on.


Don't keep doing the same thing and expect different results though.

bmenoy,

How's it going?

beam

Beam, thank you so much for the direction you have provided me. It has opened my eyes somewhat and in truth, I feel so overwhelmed but at the same time grateful for the amount of information that was in the post you had mentioned.

Using "This is my way of helping Newbies", I was able to find a link to another post with many, many articles. Not sure if they are all going to help me but I am slowly making my way through them.

Currently, I am reading and trying to absorb as much as i can from "No Free Lunch but all the Free Coffee you can drink. "

As a complete newbie and someone who has already destroyed his first account, I feel very nervous to go ahead and open another account.

But that doesn't mean that I'm giving up. I don't know what it is but there's something in me that wants to keep pushing forward. Hopefully I'll get to a more profitable state.

In the mean time I believe I will open a much smaller account ($500) on Oanda and practice trading microlots. I have read the advice of practicing on demos which I have tried but since there is a lack of personal financial risk, the motivation and emotions aren't as effective in helping me understand my mood swings

I'm glad to hear that you won't give up.

Just take it easy, man. You want to trade for the rest of your life, right? So "losing" a couple of months trading tiny accounts and getting the strategy and method right doesn't really matter, does it?

My personal advice is to put it all up here for experienced traders to read and comment. I did, and got some good advice.

Have a good week,
beam

Congratulations on starting your journal. It is a valuable tool.
Good place to start.
I like to think of support and resistance as levels at which there may be orders waiting to be filled. Big orders. From institutions and corporations,etc..
I have found pivot points and their associated support and resistance levels very helpful. These are areas where price action will very often stall as it may be these levels are where the orders are waiting.
Price actions tends to go from one s or r to another...
They make good price targets. And good levels to initiate trades from when the price actions starts to move.
The 200 ema is a strong reistance and support level.
I also like the 1 minute chart. Simply because so much happens in a short period of time and so lessons can be learned more quickly. Demo or micro are safer for risk. Without having achieved some level of competence in trading it is simply throwing money away to trade any significant amount of money. Get the trading right and the money will come.
Everything is there on the 1 minute that is on any of the higher time frames, just quicker.
Speeds up the learning process at least in terms of technicals.
There are many lessons to be learned on the way to successful trading, not just technicals. But that is a good place to start.
Best wishes..
Stay with it.
It's worth it.....
If you like I can post a pivot indi...
Best wishes,
jiva34

Beam,

Thank you for your continued support. It is very supportive. One of the things I am confused about is the method one takes to learn this business.

After reading threads of certain members here (Jacko, James16) and articles on the web, I see two different routes. One seems to be that of a "Trading system" whereby the individual is to continually and persistently follow a certain number of steps without fail and depending on the probabilitistic nature of the method, have a larger number of wins than losses.

The other route is to learn and understand and basically be able to "feel" the market so that you can read it like a book and act instantly depending on the situation. This is a less structured method but seems to be a better way of trading.

I personally prefer the second path because that allows the individual to actually understand and act based on this understanding. To me, this is a more profitable and productive means of trading.

I guess the big question is: How do I learn to become the type of individual portrayed in the second method?

Thanks for everyone's help.

Hello jiva34,

Thank you for your words of advice. What you mentioned here:


rang true in my way of thinking but I was scared away from that process because it is not a suitable environment for newbies such as myself. I have tried to look at the 1 min, 5 min, 10 min, 15 min and 30 min charts but I just haven't been able to see anything that would help me in my process in becoming a successful trader.

Recently I have been directed towards pivot points after reading various threads, but still haven't really been able to understand when a particular level is a valid s/r level or not. In some cases, certain levels are broken without a flinch but in other instances these levels are tough barriers for price to get past.

How do you see these levels?

I would love it if you or anyone posts whatever may help.

Thanks

And that word is POTENTIAL. No method, system, MA, indicator, trendline or whatever is going to give you a 100% trading methodology.

All they can offer is the potential for a trading opportunity; nothing more, nothing less. Some folk have a screen full of stuff that blinds them to price action - others trade naked and only rely on price action. Who is right? Any of them if their accounts keep growing.

I only use Support and Resistance and I am happy to offer the basics of how I work. I have no doubt that people trading short-term charts can and do make money. All I can say is that you need to start on longer timeframes with the smallest lot size (unit size with Oanda) until you understand how the market moves. There are threads here that guide you on certain bar patterns that have proved reliable over a long period of time. I think you've found J16's stuff - study it and see how nearly everyone who has taken the lessons onboard has prospered. There is very little else you need to succeed in this business.

Even those patterns fail on a regular basis because they are only potential signals - a sign that the market may be about to reverse. Pinbars fail, Inside Bars fail, Head and Shoulders patterns fail, ascending/descending triangles fail, double tops/bottoms fail blah, blah, blah.

Until you accept that there is no magic wand that gives you infallible insights into the market you are only making the journey of discovery needlessly long.

If you want to understand Support and Resistance you will find all you want by searching this forum and the WWW. The lessons are simple to learn but need a pile of screen watching to even come close to mastering. Once you have the concept clear in your head you will have laid the foundations for any other methodology you want to bring to the table.

In the meantime, here is the results of 12+ months study, demo-trading, adjustments, refinements and profitable live trading. You can do with it as you wish. it is given freely and with the hope that it will help you move forward.

If you choose to ignore it, that's good too. I was just hoping to save you all the work I've put in on your behalf.

-----------
Hint #1: Open a Monthly chart on any pair
Hint #2: Switch to the Line chart
Hint #3: Zoom out as far as you can
Hint #4: Go back in history as far as you can
Hint #5: Start looking for all the major areas where price has made a DRAMATIC reversal
Hint #6: Note the CLOSING price
Hint #7: Draw a horizontal line along that price point
Hint #8: Wait for price to meet those price points and wait for confirmation that the S/R lines you have drawn have either held or failed; if it fails wait till price meets the next S/R line and wait for confirmation - wash and repeat until you find the S/R that does appear to hold
Hint #9: Trade the trend (Monthly - Weekly - Daily - in that order)
Hint #10: Trade based on price action around the Daily - 4hr chart
Hint #11: Stops below next S/R line
Hint #12: Use minimum position on entries and add in as the direction is confirmed
Hint #13: Prospective Take Profit area is next S/R area above/below your entry but be ready to get out if price stalls for too long before it gets there
Hint #14: It takes time to learn this so don't rush to make money too fast
Hint #15: Remember: All S/R areas are only potential turning points so be prepared to be wrong
Hint #16: Practice on one pair on demo for a couple of months to get a feel for how this works
Hint #17: You'll pick this up quicker if you have NO indicators on the chart and learn to read what price is doing around these areas
Hint #18: Always wait for price to make at least one Daily close above a Support area or below a Resistance area before entry on a new trade or closing an open trade. This means you'll have to hold for a much longer time than you are probably used to, that's why you enter with the smallest position size you can use and add in as the trend returns in your favour.
Hint #19: Always remember the old maxim - previous Support should become Resistance and vice versa

Thank you PeterFM for your guidance, especially the hints you have accumulated over your years of experience.

Hopefully they will all soak into my mind and I can incorporate them as well.

When you see your long entry moving toward a resistance level (or support), how do you know if you should exit out or stay on for movement to the next level above?

This question come about after trying to understand hints 8 and 18.

Regards

As a rule the next level is my target; sometimes fixed, sometimes mental.

This is something that comes with time so my suggestion to you is to set a fixed target but be prepared to close early if price looks to be struggling to get there. This is one of those gut feelings that you develop with hours spent looking at charts. It's not infallible, of course, nothing is. What you need to develop is the ability to forget the pips you might have gained IF you'd stayed in.

Remember with S/R trading there is always another opportunity. If you took your profit at a Resistance level and price keeps moving up, there is a strong possibility that a retracement will occur and this gives you a chance to get back in if you get the right signal.

Pick a pair, mark your lines and then slowly start from any point in history and learn to see how price wanders around these areas before committing itself, one way or another. One thing you will see is that a sequence of closes above Support, or below Resistance, can be a good guide as to how price may move subsequently.

You can only develop this feel for the charts by studying them for many hours - but like all the best things in life your work will be rewarded.

Nice one on starting this thread. I've been trading losing and winning but mostly been learning

If you do want to go a bit deeper and understand one theory why price turns at support and resistance areas, can I suggest you google Sam Seiden and watch his videos? It may help you understand the order flow and pick up some nice trades. I've been practicing for a month now with this knowledge and my trading seems to be better