My forex question thread ;)

instead of making everytime a new thread,when i have a question, i’ll just ask you guys in this thread i hope that’s fine :wink:

ok my first question is:
We define support and resistance levels as zones, how many pips should be the zones? like 5-10 pip range?

It entirely depends on past price history. It’s possible though would be unusual to have a S/R zone of precision accuracy (0-1) pips wide. Imagine that all the swing high / swing lows of the past candles had been hitting a given precise level in the middle and two lines marking the lower and upper channel: then you would have theoretically just one S/R line across the middle of the chart and one at each side of the channel. In reality S/R will not work out this way; instead a ‘Zone’ or ‘Range’ will be evident for each S/R area. The width of this is arbitrary and again one could conceive of it being relatively wide. Once again though, a wide zone would no longer look like a pattern and hence it wouldn’t be an obvious area of S/R.

As you have probably gathered, S/R is an art not a science and you’re right that a typical range probably exists but I haven’t seen that quantified.

If you going to look for zones then I would pick a specific level within that “zone”, 00 .20 .50 .80
So if your “zone” is 1.5540 to 1.5560 then pick the price level 1.5550 as your support or resistance level.
Personally I do not use zones, as a 20 pip zone is way to wide and can be the difference between a winning or loosing trade. There is always a specific level price is trying to reach to, go through your charts and have a look. This is the way I have been taught and have trained myself to look for support and resistance levels, I do realize there will be some naysayers but what I am trying to tell you is if you must use a zone, pick a specific price level within that zone and allow for 5 pips either way.

I would recommend using forex backtesting software to go back through the history of the pair and get a feel for what works. Like elegy400 mentions above, it is not an exact science but if you get to know the ‘personality’ of the pair, you can get a good idea of where you should put your stops.

I’m sorry, I am just set in my ways:

http://i43.tinypic.com/35000hg.gif