Today we will learn about how we can use support and resistance zones to trade forex in a Trending ( uptrend or downtrend ) Market. You can use this method as a trading idea or use this method to help any other trading idea as well. A simple forex trading idea by Prathilaba Sri Lanka.
( Uptrend in a trending market )
What is a trending market ? A trending market can be either a uptrend or downtrend. Basically the price will go up like climbing a mountain ( uptrend. Just like in the image above ) or fall down like climbing down a mountain ( downtrend - refer image below few paragraphs.. ).
If you carefully look at the above image, you will notice that the price gradually moves up in a pattern ( uptrend ). You will then notice that price is at the highest level at some points ( These are called higher highs in general ) but does not go above that zone marked with two dashed lines on top. So this particular area is a strong resistance zone and price is unable to go pass that area. Higher the number of higher highs means a stronger resistance zone ( How to draw resistance lines in a forex chart ? look for at least 2 to 3 higher highs and mark the zone. These zones are more effective in 1hr or higher time frameworks ).
Now look at the two dashed line at the bottom area of the image. You will notice that the price reaches that lower area but does not fall below that zone. This is called a strong support area as price was not able to break that area in the uptrend market. It makes some lower points as well right ? These are called lower highs.( How to draw support lines in a forex chart ? look for at least 2 to 3 lower points and mark the zone. These zones are more effective in 1hr or higher time frameworks just like higher highs ).
Look at the image above once more. Price tends to go up gradually right ? It means an uptrend market. So always trade with the trend to be on safe side. You can place a 'BUY' (green button) order when price reaches lower support zones and start rising.
If market is an uptrend = Place 'BUY' order at lower support zones and start rising.
What shall I do, if the market is in a downtrend ? ( where price gradually falls. Refer image below )
If market is a downtrend = Place 'SELL' order at higher resistance zones and start falling.
( Downtrend in a trending market )
Generally if it is an uptrend, it will not be able to make higher highs and you might notice the rise in price is low. Similarly it will be the opposite in a downtrend. Also uptrend and downtrends support and resistance zones can get breached when a high impact news get released. Eg when central banks adjust the interest rate, jobs related news, trade conflicts, wars or epidermic etc.. ( You can use Investing.com website or app to know about the trading related news )
So in situations like that, better to stay away from trading until it makes a new trend or market calms down.
Yes, you can use this method for any type of asset or type of trading trading brokers.
Patience and Practice will help you for better trading results. You can use forex candlestick patterns and forex chart patterns as well to get better results but sometimes keeping things simple is the best way to go =).
Good Luck ! 🙂
( RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK. )