Forex Charts Support Resistance Tricks, Part 1

This brief tutorial shows how professional traders of stock, futures and Forex charts use support and resistance levels differently than amateurs.

Retail traders often learn just enough to get themselves (and their trading accounts) into trouble.

One example is misunderstanding how support/resistance levels are properly read.

Common Problems

Have you ever used support/resistance to enter or exit a trade, but you miss the trade because the market didn’t quite reach that level?

Or conversely, the price bars on the chart (whether Forex, stocks, E-minis, etc.) went through your support/resistance line, so you didn’t think it held, and then the market bounced back toward the line on your chart.

This quick video will show you how to read support/resistance levels like a pro!

Enjoy the video and please leave your comments below.

PART 2 is now posted further down on this same page with a follow-up video.

You’ll find the text below this video if you want to follow along.

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons at the very bottom of this post:

Video Text:

Today we are going to go over a Forex Charts Strategy with regard to support resistance. A lot of people have a misunderstanding about support/resistance thinking that the market needs to go right to the previous high, previous low, the pivot level, the Fibonacci level, whatever support/resistance level you’re looking for in Forex charts, and that is absolutely 100% not true.

Support and resistance levels are not lines. We see them as lines on our charts but they are actually zones. Now that makes it a little more tricky to establish exactly where those value areas are, so we need to have an objective strategy for doing that and that’s what I am going to share with you today.

The Basics

So right now, we’re going to look at just very simple previous highs and lows on Forex charts. Here we have a previous high, and then here we are coming up to another high.

A lot of people would say that this high did not provide resistance for this high over here because it made a lower high. It’s technically is true if you’re just simply looking at the highest themselves. So we have a high here and a lower high here. However that is not really the most accurate way to look at it. And the reason is this, in my treating approach I talk a lot about market logic, and by the way I have noticed a lot of other people stealing that term from me lately, which I’ll take as complement. But all my trading is based on market logic which essentially is founded on the principle that markets are huge auction places, that’s what they really are in real life.

And so if we want to have a strategy that’s going to work and continue to work in the future on Forex charts, it needs to be based on the logic of masses and masses of people and how they operate in an auction place.

Support/Resistance Principles

One of those principles, when it comes to support resistance is that the markets are a bit messy. They are not completely accurate. In other words what I am talking about here, let’s look at this again, so we made a high here, and that’s great. And little bit lower high here. To expect the market to go back up here, and let’s actually draw a horizontal line, let’s make this really pinpoint precise. There we go. So for a mark way at that high, a lot of people would expect the market to come back up and reach that high. The highest high that was previously made as resistance.

The problem with that is markets are not that neat and tidy, again to translate that into market logic terms, human beings as they behave en masse.

Remember we got, this is the Euro, US dollar. We’re talking about the spot Forex market, so first of all there is no central exchange. Number 2, you got people all over the globe trading this thing. So you got masses, hundreds, thousands, millions of people all trading this. And to expect that the market’s going to be a perfectly accurate, and coming up and touching this high and then going down, well sometimes that happens but that’s the exception to the rule.

So we have to allow for that messiness of human behavior. As it comes up to that high, people are a little afraid, little scared, maybe they get overly aggressive, we have to count for both of those because that’s how human beings operate, is they operate in emotional ways. Fear and greed being the primary two emotions in the market.

How to Trade Forex Charts Like a Pro.

So instead of using the highs, what I like to do is use the candle stick real bodies. So I’d bring it down to there. And this is one approach. There’s another technique, and I’ll show that in a future video, but if we use this, then what we’re saying is, these wicks here, on candles, these shadows on candles, are areas where the market did not find real value. And rejected these values, to use market profile terms, and this is really where the significant resistance was, where the real bodies are.

So that’s where we need to start looking for resistance. And since the market does come up and hits the line that we draw of off the real bodies. Therefore we’d say yes, this high did provide resistance for this high. And that’s a very good way of doing it. Now let me show you another way.

Another way would be to look in this area and connect as many of the bars in this  zone as possible. So we could go back to this, connect this bar and then 1, 2, 3, 4, 5 bars. And then you’ll see that it brings it down even lower and it connects with 3 bars instead of just the 1. Again this is just a very logical approach to say that this zone or this area within here is where the market found a lot of resistance to go up any further.

And instead of looking for the extremes, look for where the majority of the voting was. You can look at it that way. Majority of the voting was, as far as people starting to feel that this is getting overbought. And connecting the most bars together there and using that as your line for your resistance.

The Bottom Line

So bottom line, remember support resistance levels are not really lines, but they are zones on Forex charts or any other financial market’s chart’s. If you see either one of these strategies, thereby drawing it off of the real bodies, or connecting the most bars within that area, within that zone, then that’s one way of showing that you are looking at zones instead of just lines.

Therefore you’re accommodating the not just idea, not just the principle, but the fact that markets are a bit messy, they are not completely accurate. When masses of people are trading, they are going to get a little scared, get out a little earlier than the recent time or maybe get out a little bit later.

In the next video, we’ll look at what happens when you make technically higher high but it’s really holding resistance. It is not really to be considered a higher high. So we’ll look for that in the next video.

Leave a comment below telling me what other stock market trading strategies you’d like me to teach in the future.

Also I am giving away one of my favorite trade strategies. Just fill out the yellow form at the top of the side bar on the right. Once you do that, I’ll personally send you an email with first video.

For another video on Forex charts, Simply click here:
https://www.topdogtrading.com/stop-running-for-emini-trading-forex-day-trading-and-stock-market-trading/

Go here to Subscribe to my YouTube Channel for notifications when my newest free videos are released:

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Forex Charts Support Resistance Tricks, Part 2

This quick tutorial is a follow-up to part 1 above. In this video I’ll show how professional traders of stock, futures and Forex charts use support and resistance levels differently than retail traders.

Amateur traders often learn just enough to get themselves into trouble. Remember to treat your study of Forex charts seriously. The devil’s in the details!

One example is misunderstanding how support/resistance levels are properly read.

This quick video will show you how to read support/resistance levels like a pro!

Enjoy the video and please leave your comments below.

You’ll find the text below the video if you want to follow along.

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons at the very bottom of this post:

Video Text for Forex Charts:

Hey my friends, Doctor Barry Burns here, with Top Dog Trading.  And today we go to part 2 of our little series Forex Charts Support and Resistance Tricks.

Obviously there was a part 1 and if you didn’t see that, then I’d say go ahead and watch this video first while you’re here and then after you’ve watched this one, go ahead and type in the exact same subject except for part 1 and watch the first part because that covers things not in here.

The Premise

The basic premise that we talked about in part 1 is that support and resistance levels are actually zones and not lines. Because of the market being rather imprecise because of masses of masses of people trading and get hundreds of millions people, all trading this stuff and so not everyone’s going to buy, sell, takeout stops, take profits at the exact same place and that’s makes markets a little messy.

When it comes to resistance for example, here is a resistance level at a previous swing high. So that’s the high obviously. Now in the last video, in part 1 we talked about what happens when you put in a lower high. But it still reaches the resistance zone. Now this time we are going to talk about the exact opposite. How to determine whether market is broken through resistance if you put in a higher high.

A lot of people think, “oh if you put in a higher high then that resistance was already broken.”

Not necessarily, because it’s not really a line, even though it looks like a line that we draw down there. But it’s truly the zone. So here we go.

So let’s take it off there for a second. We got our line already brought there so now, here the next bar, we come back up to that resistance level. That zone.

This was the high and now we put in a higher high. Technically that is a higher high. But have we broke the resistance yet? The answer is no. it’s not broken. It’s what I call, pierced. Because of a couple of things.

Digging Deeper into Forex Charts Support/Resistance Levels

The market closed, and that bar closed back down below that previous high. So it tested price is above there. But at least at the moment, this previous swing high is not literally broken but the market is testing it.

The next bar, it’s still not broken, we put it in an inside bar so that’s just neutral and that sort of thing happens a lot. When we come into support resistance zones, if lot of people see that resistance zone and they aren’t sure yet if it’s going to break or its going to bounce off of it. And so the market tends to pause. People are waiting to see what will happen.

Now the next bar, it does put in not only higher high but also closes above the previous swing high. So again here is our previous swing high and now the bar closes above the high. The previous swing is till not broken, it’s still only pierced.

The basic concept here is that we want to see above this resistance level, a real commitment of traders in the market place. Again, because you have so many people buying, selling in the market isn’t going to always hit the resistance level on the Forex chart to the penny, the pip, the tick. It’s going to go little bit above, little bit below.

We need to give it that allowance. So at this point you see, the candle stick is still half above, half below and so we are still going to say, okay we are in this resistance level but the market hasn’t decided yet if it is going to go through or if it’s going to bounce off.

The next bar, it still hasn’t decided. Why? Because its inside bar to the previous bar.

The Confirmation of a S/R Break

Alright, next bar. Boom. Now it has decided. Now that’s a commitment. So the rule I use, this is the bottom line, rule is that we need an entire real body, meaning the entire red or green part of the candle to be above  the high of the previous swing high.

When that occurs, then I consider that resistance level actually broken and the market having committed to saying “yes.” We are now considering this resistance, no longer to be resistance, could turn into support later. But anyway for the time being market is seeing that, yeah we believe that the market is worth more than the value over here. There’s a real commitment of money, buying and selling.

And if we go little further keeps going up, keeps going up, keeps going up and now obviously it’s really broken. But our signal that we would consider it really decisive would be this bar right here.

ANOTHER EXAMPLE

The last one we saw where the market did break through the resistance level. Now let’s see this one where it does not. So you can see the opposite.

So we’ll go off of this swing high here and so there’s a swing high. Now when we come back and we test that resistance level again, what happens? We technically put in a higher high. But would we consider at this resistance level or zone is broken? The answer is no because the market has not really made a big commitment to it yet.

Yes its put in a higher high, yes its closed above the high but it opened below that and this candle is splitting that horizontal line. And so therefore there is not a strong commitment up there yet. It’s all just in the area of being messy. The messiness of the bid/ask auction place.

And then as you can see the very next bar comes down and that resistance is not broken. It is tested, a little bit of you know, again just chaos where market go a little bit above, little bit below the line, we allow for that and now we have a rule for it.

That rule is the real body of the candlestick on the Forex chart has  to be completely above this resistance line. It wasn’t and then the market completely rejected that. And came on down and resistance held. It’s very simple. It’s very objective.

Pay It Forward My Friend

PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons below:

Leave a comment below telling me what other stock market trading strategies you’d like me to teach in the future.

Also I am giving away one of my favorite trade strategies. Just fill out the yellow form at the top of the side bar on the right. Once you do that, I’ll personally send you an email with first video.

For another video on Forex charts, Simply click here:
https://www.topdogtrading.com/stop-running-for-emini-trading-forex-day-trading-and-stock-market-trading/

Go here to Subscribe to my YouTube Channel for notifications when my newest free videos are released:

https://www.youtube.com/user/TopDogTrading?sub_confirmation=1