Simple Support/Resistance System (810 Method)

Trading Systems Free Forex Trading Systems
1

[B]810 Method - Simple Support and Resistance.[/B]

[B]Description[/B]- This system uses basic support and resistance lines. It is required that you have the capability to draw basic support and resistance lines. Please note that drawing this lines is an art and takes lots of practice, however I think you find that this method is highly effective after some practice.

[B]Step 1 - Drawing Lines[/B]- Open up a 15 minute chart and draw in support/resistance lines that are valid for up to the past trading week. Identify the nearest resistance level and nearest support level. [I]Note:[/I] Drawing these lines is difficult and is not quite an exact science, it requires practice.

[B]Step 2 - Entries[/B] - Wait for a 15 minute candle to make a significant close above/below either a Support/resistance line. If the candle has a long wick in the direction of the resistance or support than this is likely not a valid break. A candle that closes completely up above a resistance line or completely below a support line, (No wick in the direction of the line) is a strong entry signal.

[B]Step 3 - Money Management[/B] - I usually trade GBP/USD and GBP/JPY with this method. I shoot for 50-75 pips profit on the GBP/USD and 100-150 pips profit on the GBP/JPY. Stop losses should be set at an amount equal to your selected profit, so as to maintain a 1:1 risk:reward ratio.

[B]Other Notes[/B] - This method is completely scalable. It can easily be reworked to function longer term on 4 hour or daily charts. This system is not completely mechanical, so there is a bit of an experience factor, however this method is very basic and requires no indicators.

[B]Your enemy[/B] - Obviously False breaks. False breaks of support and resistance lines where it whipsaws back. Heres something I noticed though. If its far away from a resistance line (or support) and it makes a huge move to the line without a retrace, expect a false breaks even if momentum carries it beyond the line. Also avoid trading breaks of lines that have another support/resistance line very close to it.

by <[email protected]>

2

don’t rely on any other indicators?

3

This kind of system does work, at least on 4h… I have not tried with lower timeframes.

No indicators are needed to be a successful trader. Infact, a system like this makes things much more simple with less distractions. It does take some practice to place S&R lines properly – and as the original poster says it is more of an art than a science, although here is one factor to keep in mind: It helps if the S&R line has historical evidence of S&R at that price.

A system like this also kind of “forces” you into learning how to trade without relying on any particular system. S&R is very basic and is found in any market – forex, stocks, futures, trending market, ranging market, whatever. It can be applied to all of it.

Some of the best “systems” and methods don’t use any indicators at all, just basic drawing tools and the power of our own human intelligence, discretion, and judgement :slight_smile:

EDIT: Also it’s very important to get good at setting appropriate stop losses. It’s very common for a line to technically be broke, but retrace quite a bit before finally pushing on through. This is especially true for GBP/JPY where you may need a 50-100 pip stop loss or more in some cases…

4

…it’s also interesting to fib the support/resistance high/low range and note how reliably price hits the 38.2 extension in the direction of the break :cool:

5

breakout system so easy to understand and more suitable for people had another job than fx bussiness. And have lot of advantage. But the hardest thing is consistent usin this system. Becoz sometimes u will see breakout will fail due to whipsaw like eight10 said before. I’m usin breakout too, and had positive performance :slight_smile: