We will see how we can use range market support and resistance zones as a simple forex trading idea and place forex trades. We will learn about the process in identifying range markets, support and resistance in range market and placing of trades in this article.
( Range Market - Price stays within a box / rectangle area )
What exactly is a range market ? When price stays around a rectangle or box shape area, it is generally referred to as a range market. Normally these types of situations arise just after huge move in price as both bears and bulls are trying to move the market in both directions ( So after a range market, you will most often see a uptrend or downtrend ).
If you look at the image above, you will notice that the price was not able to go above a certain level and falls back right ? ( look at the top lines ) These areas are called strong resistance zones/areas in a range market.
So How can i mark these zones or draw resistance lines ? Just looks for 2 or 3 strong resistance points ( top points ) and then draw a line or two ( generally the resistance zones will be more effective in 1 hr or higher time frameworks. Higher the time framework, more effective the resistance zones ! ). When you become familiar with the charts & range markets, you will be able to identify these zones easily and trade without even drawing lines !
Now look at the forex chart image again, you will notice that the price was not able to go below a certain price level right ? ( look at the bottom lines ). These are strong support zones in a range market.
So How can i mark these zones or draw support lines ? Look for 2 or 3 strong support points ( lower points ) and draw a line or two ( same like resistance zone, these too are more effective in 1 hr or higher time frameworks.)
You can enter a 'SELL' trade when price reaches resistance zones and falls back.
You can enter a 'BUY' trade when price reaches support zones and falls back.
In order to make sure the trade will become more successful just zoom in and look for overall trend in the chart ( if it looks like an uptrend, better to go for 'BUY' trades. If it looks like a downtrend better to go for 'SELL' trades. Incase if it looks more like a range market ,then you may enter both types of trades )
Well unlike in trending markets, it will be bit difficult to identify the end of a range market but high impact news ( you can use investing.com or similar sites to get trading news ) can result in ending the range markets. Also if you notice the price slowly heading towards one direction, it may be an indication that the range is about to be over soon.
You can use it for any type of asset trading.
You can use candlestick patterns and chart patterns for better trading experience. Also make sure you choose a good reliable forex broker.
Also refer ' How to trade in a trending market using support and resistance ' to learn about simple uptrend and downtrend market trading ideas.
Good Luck ! 🙂
( RISK WARNING: YOUR CAPITAL MIGHT BE AT RISK. )
Prathilaba June 30th, 2020
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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. )
Prathilaba June 29th, 2020
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