He has a monthly readership of , traders and has taught over 20, students. There are many different Forex trading strategies. However, there are some basics of reading a price chart that you need to know before you can move on to learning any one strategy in-depth. Support levels are created as a market turns higher. So, if a market is moving lower for example and it then changes direction and begins moving higher, it either has created a level of support or bounced off a previously existing level of support.
Resistance levels are created as a market turns lower. So, if a market is moving higher for example, and it then changed direction and beings moving lower, it either has created a level of resistance or bounced off a previously existing level of resistance:. Identifying and plotting support and resistance levels is by no means an exact science. Now, one important point that I want you to know about support and resistance levels is that they are not concrete. Many traders seem to think support and resistance levels are concrete and that they should never trade a setup if there is a support or resistance level close by, this can result in them getting analysis paralysis and never entering a trade.
While it is true that you need to take into consideration the key support and resistance levels in the market, you also need to look at the overall market condition. Instead, watch these levels for trading signals. You see, when a Forex trading signal like a price action setup forms at a key support or resistance level, it is a very high-probability even to take notice of.
Trending markets offer us the best opportunity to profit, since the market is clearly moving in one general direction; we can use this information to our advantage by looking to enter the market in the direction of the trend. An uptrend is marked by a series of higher highs and higher lows, and a downtrend is marked by a series of lower highs and lower lows. Note that trends do end, as we can see in the daily EURUSD chart below, the downtrend has come to an end recently after the pattern of lower highs and lower lows was broken….
I like to trade with the near-term daily trend by looking for high-probability price action strategies forming within the structure of the market trend. What I mean by this is essentially looking for price action setups forming near support as a market rotates lower in an uptrend and near resistance as a market rotates higher in a downtrend.
Markets ebb and flow, and if you can learn to take advantage of trending markets, you will have a very good shot at becoming a profitable Forex trader: Since trends do end, we can also take advantage of this information. However, counter-trend trading is inherently riskier and more difficult than trading with the trend, so it should only be attempted after you have fully mastered trading with the trend.
When a market is in a trading range it means that it is consolidating between a level of support and resistance. We can use the fact that a market is bouncing between support and resistance to our advantage. As the market approaches the support or resistance boundary of the trading range, we have a high-probability entry level, since risk is clearly defined just above or below the resistance or support of the range.
When trading price action in trading ranges, you can watch for obvious price action setups forming near the boundaries of the range, see here:.
We discussed Forex charts in Part 7, but as they are very important to the way that I trade and teach price action, I wanted to give them a little more time. I have previously written an excellent tutorial on Forex candlestick charts that you can check out here: I have an excellent free tutorial on candlesticks that you can read here: Forex Japanese Candlestick Patterns.
Forex candlestick reversal bar trading strategy. You are probably going to come across many Forex website selling Forex software that they claim will fully mechanize the process of trading, so that all you have to do is click your mouse when the software tells you to and then rake in the profits. Like I said before, you are probably going to come across a lot of these robot websites if you have not already.
You are best served by ignoring them all together. The point is that trading software cannot work over the long-term because the market is constantly changing and as such, it takes the discerning discretion of the human brain to effectively trade the markets over the long-term.
I am not saying that computer software has no place in trading, but it cannot be the only thing you rely on, and it certainly should not be used in attempt to fully-automate the trading process. The ability to read the raw price action of a market and grow and evolve with the ever-changing conditions of the market is how I personally trade and how I teach my students to trade. Jump To Next Chapter — Part 9: Common Forex trading mistakes and traps.
Introduction — What Is Forex Trading? What is Professional Forex Trading? What is Fundamental Analysis? What is Price Action Trading Analysis?
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Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. So, if a market is moving higher for example, and it then changed direction and beings moving lower, it either has created a level of resistance or bounced off a previously existing level of resistance: Note that trends do end, as we can see in the daily EURUSD chart below, the downtrend has come to an end recently after the pattern of lower highs and lower lows was broken… I like to trade with the near-term daily trend by looking for high-probability price action strategies forming within the structure of the market trend.
When trading price action in trading ranges, you can watch for obvious price action setups forming near the boundaries of the range, see here: Forex Trading Terminology Part 3: Introduction to Forex Charting Part 8: Common Forex trading mistakes and traps Part What is Technical Analysis Part The Psychology of Forex Trading Part Checkout Nial's Professional Forex Course here.
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