[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.
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