The main thing when trading according to the levels of support and resistance is to find a certain criteria of the breakthrough of these levels as a signal to enter the market.
The target of every Forex trader is to find the best moment of entering the market and trading strategy of support and resistance levels gives perfect opportunities to catch a good trend. Forex market is very chaotic and unpredictable.
Its complex system is influenced by many factors of the outside world and causes its movements.
Let’s see what is hidden behind a candlestick chart that shows a potential breakthrough of the support or resistance level.
The most patient traders who are already in the market and keep the open positions will leave their positions open anticipating of the end of the market’s correction. The more emotional traders will see the opportunity to enter the market on the opposite side, trying to catch the top of the market’s trend. The rest will remain as observers, not entering the game and their opinions on the further development of the situation will be different.
At this stage, the behavior of prices stays uncertain, since the opinions of the traders in the market are divided. In addition to that there are still a lot of other participants who are currently out of the market and they are not in a hurry to enter it.
Every trader has his own minimal measure of minimum uncertainty that is needed to enter the market. This criteria is directly related to the psychology of a trader.
Since every trader has his own criteria and levels of risk, so they will enter the market at a certain price level at different time. When the bulk of traders make their decision and open trading positions in a certain direction, the market will become the most certain. In the charts it will be presented by a strong trend in a certain direction accompanied by some price corrections.
There are many external factors that decide the market’s direction. The most important one is a fundamental factor based on the analysis of the macroeconomic indicators and events as well as the technical conditions laid down in the past movements. When all these factors contribute to the price movement in the same direction, an experienced trader has an ability to recognize a potential trend before it starts.
Therefore, if you do not have much experience to predict a good trend with a high level of probability, we recommend you make a detailed analysis of the price movements in the past along with technical and fundamental analyses that will give you much more certainty than watching the screen waiting for the breakthrough of the resistance or support levels.
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