The Authority’ on Price Forex trading for beginners tutorial french Trading. In 2016, Nial won the Million Dollar Trader Competition. Support and resistance levels form the foundation of technical analysis and they help us build a framework from which we can understand the market.
As I teach in many of my lessons, my overall trading approach can be summed up by the acronym T. I discuss the Trend and Signal portion of T. Perhaps the most important support and resistance levels are traditional swing highs and lows. These are levels that we find by zooming out to a longer time frame, typically the weekly chart or possibly even monthly.
What we want to do is simply identify the obvious levels that price either reversed higher or lower at and draw horizontal lines at them. This is referring to the phenomenon of a market making higher highs and higher lows or lower highs and lower lows, in an up or downtrend. These levels are good entry points as well as points to define risk or stop loss points. You can place your stop loss on other side of these levels. For example, in the chart image below, we see a clear downtrend in place. We can look to sell or buy at swing points even if they are not part of a trend.
Markets spend much of their time consolidating and in trading ranges, so we should be able to find trades within those market conditions, not only in trends. We can simply use the most recent swing high or low as a risk point to define our next trade, which you can see in the chart example below. In the image below, notice that price broke lower, down through support, then it stayed contained under that level, which was then acting as resistance. We could look to sell at that level or just below if price stayed contained below it. In this way, that level is defining where we will look to take our next trade and we know if price moves beyond that level our trade idea is invalid, so placing our stop loss just beyond that level is obvious. Next, let’s talking about dynamic support and resistance levels. What I mean by dynamic is moving levels, in other words, moving averages.