Every trader starts his journey with a simple book or video where it explains what is forex and what the words we use means, soon after you get to understand the very simple concept of Support and Resistance.
This is when you can start to understand what is your mission and to be honest, it’s also cool cause you get to draw lines and talk trade after you learned it.
Let’s review those old days:
A support level is a level where the price tends to find support as it falls. This means that the price is more likely to “bounce” off this level rather than break through it.
A resistance level is the opposite of a support level. It is where the price tends to find resistance as it rises. Again, this means that the price is more likely to “bounce” off this level rather than break through it.
here is the example of Support ( blue zone) and resistance ( red zone )
In my experience, most of the Retail traders will not trade Support and Resistance alone and they will use them in line with a trend line or different indicators.
and this is where market maker use this tool to show you whatever you are looking for with purpose of inducing you to take the trade so he can be the other side of your trade and after they did this enough to generate the liquidity that they need, only then they will move the market against the direction and grab their liquidity!
Support and resistance works against you!
Now that I showed you the meaning and example, let’s also review what retail trader want to see.
there is two major setup:
First is when they want price to reach a certain zone ( previous S/R ) and then trade the bounces of the levels.
Second is the famous Break and Retest strategy. those who trade this are usually more patient and will wait for the S/R to be broken and retested as more confirmation.
there is one simple rule for them specially when they add trend lines into their method:
The BREAK of SUPPORT level can TURN it into RESISTANCE .
The BREAK of RESISTANCE level can TURN it into SUPPORT .anonymous
In the picture below You can understand this concept of trade the bounce of the zone:
In the picture below you can see the example of break and retest example:
ARE YOU READY FOR TRUTH?
market makers will create all the patterns you want to see and then move the price against you!
If you want to be successful, don’t act and think like retail traders!Mark English
depending on the situation, you might see an area being respected rapidly then you might want to see the zone be broken soon. here is an example:
you also might see a break and retest in line with a trend and that is also where you want to expect a reversal! check this out:
The best way to trade them is to go AGAINST them!GPG
This is basically how I trade, I will look at the pairs and try to see how retail traders going to identify their zone using price action and then will go against them!
I hope you learned something new from this blog, and to sum it up, i have a short video for you to show you Support being form in a down trend over and over, but soon after they get broken.