How I Trade Support and Resistance Strategy to Make 300% Profit
How I Trade Support and Resistance Strategy to Make 300% Profit. Support and resistance can be defined as the sweet spots on the price chart where prices have repeatedly reversed. The support level or area is the zone on the price chart in the financial market where buying pressure is sufficiently strong and greater than selling pressure. The resistance level or area is the zone on the price chart in the financial market where selling pressure is sufficiently strong to overcome buying pressure.
8 Major Characteristics of Support and Resistance Zone
- Zones are in an area, not a price point
- Zones get better with age, So, locate major zones on the higher time frame
- Zones are sweet spots on the chart whereby price reverses repeatedly
- Zones could be extreme highs and lows on the price chart
- Zones are areas where both buyers and sellers looking to find trading opportunities
- Zones needed to be modified but not always
- Zones are better located using line charts
- Zones are easily located by traders
How I trade support and resistance strategy to make 300% profit will teach you that the more time a support or resistance zone is traded, the weaker they become and are susceptible to breakouts.
3 Basic steps to Draw Support and Resistance Zones
- Start drawing support and resistance zones from higher time frames, I personally draw major support and resistance zones on the monthly time frame. I draw minor support and resistance zones on the weekly time frame.
- Using the line chart to locate support and resistance zones have been easier and more effective.
- Ignore minor zones on the lower time frame compared to zones drawn on higher time frames
Mistakes Made in Trading Support and Resistance Zones
- Price fall short: when the price fall short the support zones and sellers quickly start taking a SELL order in trying to follow the trend and maximize profit but it was a fake breakout and they eventually lose money from the fake breakout.
- Price shoot beyond: when price breaks the resistance zones and buyers start taking BUY orders while trying to follow the new trend and maximize profit but it was a fake breakout and they eventually lose money to sellers taking full advantage of the market.
Trading Support and Resistance strategy with 2 Important Trading Styles
- The use of additional tools such as the Moving Average and Trendline
One can use either or both moving average indicators or trendlines to increase the profit ratio of trading. I have my moving average setup as – 20 SMA and 50 SMA (Smooth Moving Average). Draw your trendline on the higher time frame and never on the lower time frame only if you are scalping the market. Treat both trendlines and moving averages as areas and never as a line.
- Setting SL beyond resistance and below support
It is advised to set stop loss above the resistance zone so as to prevent losing money when the price overshoots before the continuation of the downtrend. You should also set your stop loss below support zones to prevent losing money when prices fall short before the upward momentum continues. Buying pressure often makes the market reverse at a support level, this buying pressure comes from financial institutions, hedge funds, or your broker. So is selling pressure which most times come into play at the resistance level and a reversal takes place while buyers lose money to sellers.
How do I know When my Support or Resistance Zones Will Break?
Support zones would definitely break downward and a resistance zone will break upwards. For a breakout around the support zones, new lows must keep breaking to support a breakout; where the price must have maintained new lower highs and lower lows consistently
How I Trade Support and Resistance Strategy to Make 300% Profit? For a breakout around the resistance zones, new highs must have been broken, and kept breaking consistently; where the price maintains new higher highs and higher lows only.
Another strong indication for a breakout is when the price builds up around either support or resistance zones, hence the price is bound to break out having tested these zones multiple times invariably making them weaker for a liable breakout.
Summary of How I Trade Support and Resistance Strategy to Make 300% Profit
Support and resistance trading in Forex is a popular trading strategy where traders look to buy and sell currencies at certain levels which can act as barriers to the market’s movement. Support levels are the lower bounds at which the market has difficulty falling below and resistance levels are the upper bounds at which the market has difficulty rising above. Traders look to buy at support levels and sell at resistance levels and then wait for a breakout. A breakout is when the market moves beyond the support or resistance level and continues in the direction of the breakout. Traders look to capitalize on these breakouts by entering a trade in the direction of the breakout. Traders also look to trade reversals at the support and resistance levels. A reversal is when the market moves from the support or resistance level back in the opposite direction. In this case, traders look to enter a trade in the opposite direction of the reversal. By understanding and trading support and resistance levels, traders can better capitalize on market movements and benefit from the volatility of the Forex markets.
- Mark out your support and resistance zones on the monthly time frame
- Patiently wait for price to move to the support and resistance zones
- Wait for price rejection or continuation using the help of price action with candlesticks charts or patterns
- Enter trade on the next candle after your pattern confirmation
- Set SL below support or above resistance and exit trade (TP) at the nearest swing highs or swing low.
You must have learned how to trade the financial market like a pro with these basic steps highlighted and explained above from How I Trade Support and Resistance Strategy to Make 300% Profit which is my secret to how I trade support and resistance strategy to make 300% profit. I hope you would perfect your trading styles with these additional tips and you can start making a maximum profit while you stop incurring losses. Our daily signals are available to assist every beginner, visit the page every day of the week.