Psychological Support and Resistance Lines/Levels, My Best Support and Resistance MT4 Indicator!
All trading systems and strategies employ some form of support and resistance analysis technique to influence their trading decision.
Since to make money trading currencies you’d have to buy currencies low and sell them high and vice versa (as the case may warrant) you will definitely need to some tool that would help you determine where these buy and sell levels are likely going to be.
Through rigorous testing on demo and live forex trading account with real money, I found the most effective and easy to use support and resistance indicator in my forex trading methodology to be Psychological support and resistance levels/lines, the best part is you don’t just get to use this powerful trading tool only in the Meta Trader 4 forex trading platform but on any all other forex trading platforms out there today.
Psychological support and resistance levels are subjective trading tools by design, their subjectivity makes them a very simple and easy to use forex trading tool that can be used by beginner, intermediate and advanced currency traders alike!
Psychological support and resistance levels provide kind of a filter saving you from taking on false breakout trades.
The predictive nature of these psyche levels helps give traders some the time to properly work the possible reactions to different market scenarios even before price reaches these levels, giving a higher degree of conviction on in your trading methodology with every single trade you take.
Say we wanted to set an appointment to meet, we’d probably agree on 1:00 O’clock in the afternoon instead of 12:54 right?
This is because people are naturally drawn to decade, century and even numbers as opposed to odd numbers; they’re just a whole lot easier to deal with.
If you wanted to purchase an item that costs $120 at a bargain store chances are you’d probably want to talk down the price of the item to a $100 not $111 and definitely not $107 to avoid the hassles of change right? It only makes sense!
Traders tend to stack lots of market orders at price levels ending with 00, 20, 50, and 80 numbers, lying in wait for price action to confirm or disprove their market analysis.
Major Price turnarounds, breakouts or even range bound trading activities tend to respect these psychological support and resistance price levels.
If the EURUSD currency pair was on a strong bullish move up, with the most recent swing move from 1.3612 up to 1.3693 and currently trading at say, 1.3677, the slight resistance the fiber now faces right below the 1.3680 price level which happens to be a .80 psychological resistance level or (1.3680 is a .80 psychological resistance level because the price 1.3680 ends with the numbers 80) could be as a result of profit taking since most traders who’ve been in on the long trade would want to take some profits off the table, they’ll partially close their long trades by executing a sell market order.
Another group of traders who must have missed the previous rally on the euro currency pair would be looking to get into the market as soon as they see indications confirming that price has switched to continuation mode but if this move is anything under the 1.3700 price level which is a .00 psychological resistance level many traders might not be too interested in taking on this trading signal.
The strongest psyche level is the .00 level followed by the .50 level, the .20 and the .80 levels are not as strong as the other two psyche levels, this means that a price level ending with .00 and .50 are likely to prove more support or resistance than the .80 and .20 price levels.
Open up your MT4 Trading platform pick up the horizontal line on any currency pair you wish to analyze, set the horizontal lines to overlay the price levels ending with the numbers 20, 50, 80, and 00, just as in the image below, you’ll find that price almost always respects these levels before a breakout, a reversal or a ranging market scenario starts to play out.
My advice to you is to use these psychological support and resistance levels more or less as decision levels always make your trade decisions off of a confluence of events, don’t get stuck up waiting for all the indicators to turn green but the more signs pointing to a certain price direction the better.
Psychological Support and Resistance levels should help to confirm your decision on whatever course of action you decide to take following your forex trading system rules alongside other powerful forex trading strategies in your trading tool chest.
To get the edge you need to succeed as a foreign exchange currency trader, you’ll have to learn online forex currency trading the right. Start way by getting a sound forex trading education enroll into some trading school, sign up to some training program or get a personal mentor to coach you and show you the ropes, you just have to lay a solid foundation on which to build upon a prosperous trading career.
Practice trading with psychological support and resistance levels on a demo trading account until you get the hang of it, the demo trading process will help you build your confidence level and train you to follow your trading system rules after actually seeing for yourself that they work time and again.
But for starters, try taking a retro, try to remember how you felt the first time you really thought about how forex trading forex trading could change your life and open the path to financial independence for you, it’s still very much possible you only have to make the right choices. Quitting isn’t one of them.
I hope you enjoyed reading this post, don’t forget to share it with your friends, circles and groups; they just might thank you for it. I look forward to your comments and questions I’ll be sure to get back at them ASAP!
Cheers…
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Anas Abba is an Active Forex Trader and Fund Manager at DigiTrix Fx Firms. His "Crack-the-markets-with-your-mind" Style of trading has helped 100+ of Aspiring Forex Traders all over the world achieve their dreams of Financial Freedom Through Currency Trading. Connect With Anas Abba (Forex Coach) on Google+ or Join His "Schooling Y'all on Forex" Community to get The Hottest Forex Trading Tips, Techniques and Strategies.
1 comments:
The total demand for products and services in the economy. This includes a demand from the private and public sector for products and services within the country and a demand for products and services from consumers and companies in other countries.
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