Friday, December 12, 2008

Using Support and Resistance to Trade Forex

When I say "trade forex with support and resistance", I am not talking about using those generic indicators that are supposed to give you the important pivot points on your trading charts. Those are just basically static formulas. Sure, occasionally they will work. But its more coincidental than anything else. To understand REAL support and resistance, you have to figure it out for yourself. Its not as difficult as you might think.

It begins with using no indicators. Get rid of every last one that you are currently using. This may seem really awkward at first, especially when you are so used to trading with indicators. Don't feel bad, if you do. When I first started trading, I basically flooded my charts with every trading indicator I could get my hands on. I thought more, meant better.

But when you start to trade without indicators, one thing becomes very evident: certain price action patterns have a natural tendency to make great support and resistance areas. Naturally, you probably won't see them right away. But if you stick with it and follow the markets on a consistent basis, you can't help but notice it.

The thing is, that its not just some gimmick either, There is an actual fundamental reason why these patterns provide solid support and resistance areas. Think of a price chart as an ex-ray. Its giving you an inside look at the structure of the market. The only thing you have to do is learn how to read it.

John Templeton has been a successful forex trader after learning how to trade price action. Once he understood that all he needed to trade forex was on a plain chart with no indicators, his profits soared.

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