How do you trade price support and resistance bounces? How hard is it to predict price movements. AtoZForex — Forex trading might be challenging since financial markets tend to move very quickly.
Often, it is impossible to predict the next market move. Consequently, traders face difficulties, when trying to foresee the point of price reverse. Yet, there are some techniques that will aid you in forecasting the price bounces successfully. How easy is it to trade price support and resistance bounces? There is nothing shameful to tell the reality. It is often frustrating! The strategy comprises the Average Directional Index ADX indicator, support and resistance levels, and a positive risk-reward ratio.
The first question you need to ask yourself about how to trade support and resistance bounces is: While this might be hard to answer, there is a Forex Indicator called ADX indicator that will help you. Moreover, all of the traders tend to use a different kind of market analysis. All of us use various methods for the specific pair and the time frame.
For our specific mission to forecast the price support and resistance bounce, we will utilize the Average Directional Index. This particular indicator can remind you any other traditional oscillators with a single line that fluctuates up and down. However, that is the only lookalike feature. This implies that the ADX indicator is direction indifferent. It is only measuring whether the pair is trending or is moving sideways.
The higher the reading of ADS, the stronger the trend is. The reading below 25 is what we need to focus on since we are looking for the price reversals. Then, when the price is moving in some particular trend, the ADX climbs to 25 and above. ADS below 25 could also mean no trade for you if you want to just follow the trend.
Most of the traders find this part of the strategy the most difficult. However, this is also the mist fundamental part of the strategy for price support and resistance bounce forecast. We will be looking into prior swing high and lows and using them as the potential areas of the price bounce. You can use your usual application to draw horizontal lines every time the price posts a notable high or low and then bounces.
The key idea here is to find these levels and to use them as your support and resistance levels in the future. Below on the chart, you can see 5 key levels. These levels indicate the price bounce in the past and extension of the horizontal lines further. The last, but certainly not the least step of our strategy on how to trade price support and resistance bounces is actually trading the bounce.
In this way, we are sure that the price has the potential to reverse at these lines. The chart displayed below provided us with two options for the trading of this pair: Looking at the chart we can also notice that the price has actually reversed at these lines, meaning that these trades would have been successful. However, this is not always the case.
Sometimes, prices will not bounce and the trade will bring you loss. For this reason, we recommend using a positive risk-reward ratio. Moreover, you will need to set your profit target at minimum twice as far as you stop loss.
When the market would be between the two moving averages, you would have a flat, ranging market conditions. Meanwhile, the SMA would show the overall direction of the trend, combined with the ADS and 20 SMA would be acting in line with your trend lines if you have outlined them correctly. This can be done on H1, D1 or W1 time frames. Log in Lost Password? All you need in Forex. ADX indicator The first question you need to ask yourself about how to trade support and resistance bounces is: See the example of ADX indicator below: Support and Resistance Lines Most of the traders find this part of the strategy the most difficult.
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