So I’m sure by now most people are aware of support and resistance.. It is one of the first things we learn when we first become forex traders…. Just about everyone uses it at some point and yet for some reason it isn’t as consistent as all the hype makes it out to be.
So why do we keep using it? The answer is simple… Most people don’t know any better. Everyone else does it and human beings are mostly trained to follow everyone else; even from young… As we go into schools we are out into systems that more or less force us to be like each other.. And anyone who doesn’t fit in or who operates in a manner opposite to “the norm” is deemed “a weirdo” but in essence it is these “weirdos” that go on to become a force to be reckoned with in this world.
You’re probably wondering what does this have to do with support and resistance, well in short – everything. As I said from the time you come into the forex industry it is almost guaranteed that you will learn the support and resistance principles. Support is the floor and resistance is the ceiling. And for the most part it looks like a good idea, it looks plausible. It looks as though it’s very easy to understand and work with. Well what if i told you it’s made to look like that so that you can remain in the system (just like children in school).
If you didn’t already know there is someone who ultimately controls the way the markets operates and it is always in his best interest to have as many people as possible be on the wrong side of the move. What better way to always have people be on the wrong side? Teach them the wrong thing and then do the exact opposite of what you taught them only validating what was taught periodically to keep them on the ferris wheel.
Sounds messed up right? Well don’t take my word for it. Let’s look at a few examples shall we?
Here we have gold and you can see on gold that randomly drawing this line here would make it appear that resistance is really prevalent… However after the third tap what happened… When retail traders who have all learnt about support and resistance see this… What do you think is going to happen.. They will place there sells thinking its going to sell and then all of a sudden it buys for no apparent reason.
Well there is a way to understand how to know when it’s a trap and when it is but we will get there soon.. Let’s look at another example first
Another fan favorite… Oil and given what happen to oil yesterday (20/04/2020) I think it’s fitting we use this as an example.
Looking at it here randomly drawing that line wokld make it appear that support wokld be absolute and retail would be safe placing buys anywhere along that line….but then seemingly out of nowhere oil just falls away.. For no real reason (technically)
So let’s now discuss if there is a way to understand and maneuver these traps… Of course there is… I want you to scroll back up to those two images and look at the areas where price touched(tapped) the support or resistance lines – notice anything? Price doesn’t stay there very long… But look at the last tap prior to the market going completely against what more or less everyone thought it would do.. Notice how long the market stayed there? That’s called accumulation. It’s also a type of induction created by the people who control the market. It stays around the support or resistance area much longer than the previous taps… Feels weird… Why would the market give you such a perfect entry?
Why would they stay there so long so you can enter?
“Most retail traders don’t ever see these traps because they don’t understand it“
Simply by understanding the way the dealer creates induction traps using support and resistance will help you understand what is real and what isn’t.
If you have any questions you can direct message @brandonforexia on telegram or you can join the academy at Backofficeforexia.net