Profiting from Support and Resistance in Forex

The key elements in technical analysis are support and resistance. Although many know about it, there are only a few number of Forex investors that know how to use it properly in order to gain more benefits in their investments.

There are certain ways of using the concepts of support and resistance in order to make a huge amount of profits from the market. One way of doing so would include using valid support or resistance concepts. Although many investors would find that a double top or double bottom would be valid, when in fact, it is not, the safe way would be to observe the history of prices. The general law that one must get used to is that if a certain level was tested before, the more amount of instances of testing would always be better, and thus, the greater the gaps amongst the tests would then gain more validity. Such a concept sounds simple enough but will need a certain amount of time and practice to get used to. Of course, experience is always a good teacher, as support and resistance must definitely be tested not just a few number of times, but instead, several times over several weeks or even months in order for it to possess validity. One cannot simply make use of support and resistance in the span of some hours or mere days as such an effort would be meaningless and only done in vain. Only traders that deal with trading on the day would ever make use of such short term periods of support and resistance, because usually, a day's volatility is at random, as a result, it is pointless using support-resistance for such.

One may line up daily and even weekly resistance points in order to help give you more of an idea of the market's flow. From here, one must remember to view the weekly charts first, and then the daily charts after during the observation of support and resistance levels. Through this, one can begin trading resistance and support that are considered as valid. One may choose to trade upon the premises that support and resistance are going to hold, or one can do a trade on a resistance break. Timing is always crucial in both circumstances so always remember that if one presumes that resistance or support will eventually hold, then he must wait for the momentum of the price to weaken to eventual resistance and then begin taking action on the confirmation of such. Make use of the stochastic momentum indicator in order to do timings on any trades.

Always bear in mind that validity is always an important factor to take into consideration and there is no short cut method or easy way out into making big bucks without putting too much at risk in this business.