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Important facts to remember when trading with supports & resistances

1  The supports and resistances can be seen at any time frames. S&R in smaller time frames are very weak and S&R in daily or weekly charts are very strong.

2  Price sometimes doesn’t change direction after meeting a S or a R. If price is increased further more  crossing a Resistance level or decreased further more crossing a support level we call it as a “breakout” .There are false breakouts and real breakouts and they are described later.

3  Never enter to a “sell” trade if the price is on the way to reach the resistance. Also never enter a “buy” trade if the price is on the way to reach a support.

Sell only when price has gone down some amount of pips after meeting the resistance and buy only when price has gone up some amount of pips after meeting the support.

5  Always place stop loss at least 10 pips above the resistance for sell trades and below the support for buy trades because slight variations of few pips might occur beyond S&R.

6  Never try to trade across S or R.

Identifying Supports & Resistances

Supports & resistnces in EUR/GBP daily chart

Support and resistance levels are the most important leading indicators in forex trading. If you throw a rubber ball to the ceiling, definitely the direction of the ball is reversed after it hit on the ceiling. So the resistance level acts as a ceiling for the rising price. But when the ball is hit by the floor again the direction is reversed. Support act as a floor for the decreasing price. Most of the times price bounces between supports and resistances. The figure shows daily EUR/GBP chart and in red color you can see resistance lines and in yellow color you can see support lines. At 0.8885 you can see a major resistance and at 0.8791 you can see a minor resistance. Likewise there is a major support in 0.8532 and a minor support at 0.8553. Having a good knowledge about supports and resistances are very important.

Is forex trading profitable?

The simple answer for this question is “yes” but you have to work hard and get a good experience of at least 6 months is essential to become profitable and that is guaranteed. Really the behavior of forex market is very hard to predict and very risky. Also forex can make you a millionaire or a beggar in a few minutes. So it is not that easy to be successful in forex trading. Only 5% of traders are successful and the majority is losers. We must try hard to enter to that 5%.  In forex trading someone is winning means someone is loosing in somewhere in the world. The banks and big investors are the big players in this game and we should try to do what they do and should not do against them as we are ants if they are big elephants. Following things are the most important rules in forex as I have seen and If you are a beginner, you should always remember these things.

Knowing that you cant always win

I have seen in lot of websites that traders providing their trading performance sheets without any loosing trades. Probably they are fake and anyone cant trade for a long time without loosing even a single trade except central banks. Very experienced professional traders also sometimes loose two, three trades in a row. So you must understand that loosing is a part of this game and only thing that we can do is reducing the number of loosing trades and also the amount of loosing.

2  Strong determination to be successful

Determination is very important not only in forex but also in any kind of work we do. At the loosing time you might end up with loosing all the positions you had at that time in different pairs. This is normal because there are correlations among most of the pairs. So after a series of loosing trades it is very hard to make our mind and for many beginners it is the end of their forex trading. If you are like that, don’t try to trade in forex anymore because you have to understand that this is the nature of forex and also you have to learn a lot of things from loosing trades. Biggest looser become the biggest winner. If you want to be a successful trader, reading books, articles, being alert for news and global economy is very important. Nothing can be achieved if you don’t spend some amount of time to learn that.

3  Trading descipline

This plays a major role in forex trading. After a loosing trade, lot of beginners try to recover it as soon as possible. This is the worst case and when you enter to trades at that  time probably you cant recover and you loose further more. So controlling our emotions is very important specially after loosing trades. Also trading very big lot sizes to become rich quickly is seen often among beginners. This is greed and should try to avoid as much as you can. Always don’t risk more than 5% of your trading capital and for beginners it is very safe to trade minimum lot size until a good experience is gained.