Hello, my friend, and welcome to this tutorial on FOREX Trading Training. In this post, we will discuss a FOREX trading strategy to determine if price bars will bounce off support and resistance levels, or slice through them. Enjoy!
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FOREX Trading Training – Video
Welcome to this forex trading training on predicting whether support or resistance levels will hold or break. Understanding support and resistance is crucial in trading, so let’s dive into how momentum plays a key role in this analysis.
Support and resistance levels are significant points based on previous market highs and lows. These levels are visually prominent on charts and represent areas where supply or demand has historically shifted. Traders pay attention to these levels because they indicate potential turning points in the market.
Analyzing Support and Resistance Levels – FOREX Trading Training
To determine whether a support or resistance level will hold or break, we need to assess the interplay between price action and momentum. Momentum refers to the speed of price movements as they approach these critical levels.
Let’s consider an example. Imagine the market approaching a support level during a downtrend. If the market hits this support level with strong selling momentum (visible as a series of red bars), it’s likely that the support will be broken. Conversely, if the selling momentum decreases as the market approaches support (signaled by overlapping price bars and a neutral MACD), it suggests a potential bounce off the support level.
Observing Price Action – FOREX Trading Training
However, no indicator or strategy is foolproof. These signals are just indications of market behavior, not guarantees of future movement. For confirmation, we also need to observe price action. If the market bounces off a support level with strong buying pressure (visible as bullish price bars), it strengthens the case for a bounce.
The same principles apply when the market approaches a resistance level during an uptrend. If the market lacks strong bullish momentum near resistance and shows signs of hesitation (such as doji or narrow range bars), it’s less likely to break through the resistance immediately.
It’s essential to remember that trading strategies are probabilistic. They provide guidelines for making informed decisions, but no strategy works 100% of the time. When a setup doesn’t go as planned, traders should remain flexible. For example, if a breakout attempt fails, consider trading in the opposite direction based on market sentiment.
Wrapping Up!
In summary, predicting support and resistance behavior involves a three-step process: identifying key levels, assessing momentum, and confirming with price action. This approach is a starting point for developing a trading strategy that aligns with market dynamics.
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