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Chapter 8, Part I. Support and Resistance Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    I hope these small and easy rules will help you to become more successful with trading around support and resistance levels.

    Pipruit: There is another item I am a bit confused about, Commander. The point is that most candles have quite different shadows near support/resistance levels, and it makes it more difficult to draw the line. Does some way exist to negate this problem?​

    Commander in Pips: Your question is reasonable. To avoid incorrect drawing of support/resistance levels, you may use simple Line chart, that we’ve discuss. It shows close prices only, in difference to Open/High/Low/Close prices of bar and candle charts. Sometimes shadows of candles add noise to interpretation, sometimes long shadows could be just a mistake of some participant so, that we call a reflex move. The line chart instead, shows intentional movement of the market, since it links close prices, and releases you from market noise. Let’s compare them and you will understand better:

    #4 GBP/USD Daily Line chart with support and resistance levels
    [​IMG]


    #5 … the same chart but in bar mode
    [​IMG]

    See – a bar chart, just as a candle chart, has many “tails” that penetrate support and resistance levels, so they become a bit blurring. The Line chart, in turn, looks much clearer from this point of view. But, after some time you will get more skills with support/resistance and will not need to shift to a Line chart any more.
     
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