Support And Resistance Levels
The support and resistance levels are a known variable in our trading. They are known because they are arrived form historical
data. To find these levels we only have to look to our left on our charts. As we have seen with our other tools , they are available to us on every time frame chart. But those in the higher time frames carry more weight ( are more important).
These areas can be turning areas or conituation areas dependent on how the current price is reacting to them. I will try and explain how I see the interaction of price at these levels. On the higher time frames. The area looks as we normally think of this levels. There is prices moving up and turning back down and prices moving down and turning backup. and the odd breakout or through areas as well.
On the smaller time frames these same areas can and do look like consolidation areas . This is because as we can now see the actual struggle of the buyers and sellers as it unfolds.. But at some point one side or the other will prevail and price will turnaround or break through.. This is why I believe so many Blogers use reference to might ywar mongers as this to them is a battle.. Let us not add any power to the act of war and see it for what it is... Buying and Selling..
As I believe it to be ( could be right could be wrong) Price is moving up to a known resistance area. It can be resistance for 2 reasons. It can be a place that some have choosen to place stops or it can be a place where others feel it is time for a change of direction in price. So as everything else in life we don't have to deal in absolutes, which most of us actually do, (Unfortunatelly as soon as you let that go and understand anything can and will happen you will be a better trader for it. )
Anyway price is moving up to a known resistance area. It may push right through it , As happens time and again at 00 numbers, I believe this is caused by 2 things . The big players may not show there cards by having orders peviuoslly placed and the time lag between the movement and the execution of those orders allows price to spike through. The second is that the price is moving on such a fundamental issue (news) and is such a large group of buyers it would take a great amount of sellers at this area to even slow it down, and sometimes doesn't and it just blows through.
But during what I consider normal trading I believe that price is held back by the amount of money wanting to be sold at this level which stops the price and reverses it at least in the short term. Then as we watch more attempts to break this area, which is more buyers seeing that the move up might be the right choice, are one buyer determined to break it. If the Buyer/s has more money to buy than the sellers has money to sell the area will break.
But if the seller has a lot more at risk he could offer more up to be sold, or other selllers can see this as a selling or short oppurtunity till the buyer/s lose interest and the price starts to retrace.
In the Big boys game of Forex these levels aren't absulote like us day traders take them . We use them to enter or exit trades. They use them to add on or to reduce there risk. Until they know what ever swing they are riding is over.
We looked at swings earlier and as everything else we have shown they are on every time frame, and each is as important as the other dependent on who is looking at it, But that being said the real players in Forex The Big Boys look at longer times to gauge the total picture and make there plans. That being said take a look at the GBP/USD on the Weeklly chart. It is at a area of great concern making new lows. But that ride down was 7,500 pips off a pin bar doji.. or you could have waited for the lower high swing to enter would have lost a thousand pips and waited 5 months to enter... Not my patient level..
We will also see that supprt and resistance levels tend to gravitate near 00 and 50 areas. This is understandable , as I am sure the main players with there team of 30 analysis and the mailroom boy making sure someone didn’t write a economic comic about the president, aren’t going to say well 1.2831 is interesting more than likelly 1.2850 or 1.2800… Just my thinking.
The attached chart is the GBP/USD 1 hr I tend to draw S/R lines on a higher chart the zoom it in to smaller time frame. I can see the areas easily on my 15 or smaller charts.The circles are showing price enteracting with the S/R lines.
We trade support and resistance lines the same as Trendlines … Bounces and breakouts. We also have to be concerned with the fake breakouts just the same as trendlines.
Good Trading To All Ken Lee :)
ps. If you draw your S/R lines off higher times then zoom down in time you may want to save them on your chart as there imortance never goes away and can come into play way down the line time wise…Next week or next month , when ever price revisits that area.
