Forex Trading Method According To The Levels Of Support And Resistance

By: Milla Shaw in Forex Consultant on Aug. 28, 2010

One of the keys of technical analysis in Singapore Forex trading are the levels of support and resistance. Every time the rate breaks a level of support or resistance, it is usually switching to another state and forms new levels of support or resistance according to its positions. Usually the changes are reversal – the support level becomes resistance and resistance turns to a support level.

The price of the market depends on the support and resistance levels. When it breaks one of these levels and doesn’t return at once so it is a great signal for any Singapore FX trader for a potentially profitable trade. However, breaking of one of the levels is not enough in order to assure you a high chance for a successful trade. It also requires the quality analysis of the breakthrough of the support and/or resistance levels.

Financial market has a spontaneous character and sometimes it is very irregular. Its volatility is often called as “market noise” and causes a lot of spontaneous movements. Making some researchers among the technical analysis books we can often find the images of a clear trend taking place after breaking one of the support or resistance levels. Such illustrations give a false impression to any newbie trader that Forex trading is so simple and making profit trading online is so easy. But the real Financial market is not as easy as it looks from the first sight. In order to realize how it works, you can analyze the historical prices of one of the currency pairs in the candlestick chart. There you will find a lot of support and resistance levels in the past periods and will be able to examine their breaking and trend appearance. As you will find out, in practice things are much more complicated and confusing. Here the problem is not only in the market noise mentioned above, it is a mix of many factors that can confuse any Forex trader – market’s random behavior, volatility, traders emotions and many others.

In order to make correct trading decisions and assure yourself a chance for successful trade, you have to create a certain criteria and rules that you will apply to the markets’ analysis before opening a trade. These rules will help you identify true and potentially good situations from false and irrelevant ones and increase your chances for profit.

According to their own experience many Singapore Forex traders obtain the levels of 3-5% for short-term trends and 10% for long-term trends. Still, this method is very simple and doesn’t show the real situation at the moment of the breakthrough price movements. Sometimes it is very difficult to decide for what trend these 10% or 5% must be counted.

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