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Chapter 8, Part V. Lines summary. Page 4

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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    Basic rules that could be applied to any lines – support/resistance, trend lines and borders of channels:

    1st rule remains intact – If market holds above/below the line and has not closed below/above it but just insignificantly pierced it (with candle shadows), more probable that it still valid. So, Close price is your first assistant.

    2d rule - the longer time line is forming the more obvious it becomes – then the more probable the appearing of a stop licking pattern.

    3d rule - to not been trapped with stop licking (i.e. Wash and Rinse) you may act in two ways – place your stop-loss order a bit deeper or wait until after the appearing of a stop licking pattern as a confirmation of the line’s strength and further upward/downward market move. After you will see, that Stop licking pattern completed – you may enter in corresponding direction.

    4th ruleStop licking is a fast pattern, so if the market has broken a Line’s level (i.e. close below/above it) and holds there for 3 periods (i.e. 3 bars/candles) or more, then probably this level has been erased by market action and is not valid any more.

    5th rule - When price breaks the support line - later it could retest it and this area can act as resistance. The same is true for resistance line – after breakout, it could act as support if market will return and retest this area.

    6th rule - The more often price tests the level – the weaker it becomes (good applied to support/resistance, partially applied to trend lines and channels).

    7th rule - The longer some level holds, the stronger could be the move after true breakout of this level.

    8th rule - The longer your time frame – the wider the support/resistance area.

    9th rule - You should never adapt trend or channel lines to market behavior. If these lines do not fit, then it’s just not reliable and inappropriate – do not force it.
     
    Hamza Samiullah and fran alvarez like this.
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