Monday, August 4, 2008

Forex Trading Education - How to Use Support and Resistance For

Author: Monica Hendrix

An essential element of your forex trading education is using
valid support and resistance to time your trading signal. Here
we are going to walk you through a live example of how to use it

The currency we are going to look at on our forex charts is the
Japanese yen.

If you look at the yen daily chart, you will see a very valid
resistance level at the 108.00 level and since March of this
year there have been numerous tests of it, over 20 and yet the
dollar has failed to close above it supported by momentum.

This resistance is very valid because there have been so many
tests. Resistance or support gain validity

- the more times they are tested and hold

- The more different time frames and the wider apart they are

- The traders who trade the market and the news sees the level
as significant

Watch the level then confirm the Trade

The way to trade it is to wait for the rise but DON'T sell until
you see momentum turn down and two great indicators for timing
your trade are the stochastic and the Relative Strength Index.
Simply wait for the level to be tested and wait for them to turn

Never just assume a level will hold, wait for confirmation via
momentum indicators

Once this occurs you can be short and you know when you're wrong
- if prices close above resistance.

This simple method of trading into valid resistance or support
works and providing you time your entry correctly with momentum
indicators, it can make a lot of money.

We have used this simple strategy to clear thousands of pips
profits, this year and we have kept it simple, nothing
complicated about it but it doesn't mean it simple strategies
can't make money they can.

While resistance holds you keep doing it sell into the level and
take profits when the dollar becomes oversold, then wait for the
next test.

Follow Reality of Price Change

If the price breaks up and closes strongly above resistance, the
odds will favour further strength in the dollar.

Simple and Effective

Sure it's simple but it can be very profitable and the above is
a good example of a low risk, high reward way of trading into
valid resistance.

You don't need to do anything else, than trade the reality of
price change on the charts and if you do and you confirm your
moves this simple forex trading strategy can make a lot of

This article was written on the 2nd Of August, good luck and
good trading.

About the author:
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