Now we will try to understand and recognize what “support” and “resistance” in Forex

Perhaps you still remember the concept of supply and demand (supply and demand)? When a request (demand) increased and supply (supply) down, then prices will go up. Conversely, if the offer (supply) rises and the demand (demand) down, prices will drop. That said economics teacher during junior high.

 

Well, in fact, the price of the currency in the market is always moving up and down. It is also influenced by supply and demand on the currency. Then, there was a time in the market where the price stops moving up or moving down stops. This is certainly due to demand or supply it is not large enough to cause prices to rise or fall.

 

In technical analysis, we can anticipate roughly when supply or demand increases. The trick is to identify support and resistance level that was.

 

Support is an area where the price level at that level DEMAND large enough to withstand the decline in prices. At this level, the price tends to stop moving down and likely to rise again. Practical language, the support level is expected to hold its bearish movement.

While resistance is an area in which the price level at that level SUPPLY large enough to stop the rise in prices. At this level, the price tends to stop moving up and will likely fall again. Practical language, the resistance level is expected to hold its bullish movement.

Now let us look at the following picture:

The above example shows the line zig-zag form graph moving upwards. When the price goes up and then down again, then the highest point reached before descending again that’s called resistance.

When the price moves up again, the lowest point reached before the price goes up again that we refer to as support. That’s how we determine the support and resistance levels in line with price movements up and down all the time.

Please also note that the level of support and resistance is not necessarily a definite level. That is only natural that some traders disputing some of the numbers when determining support and resistance. Importantly, the support and the resistance is in the range of numbers that are not too far away.

 

Resistance becomes support, support becomes resistance

 

Do not be confused. Indeed the case. Here’s the story …

 

Although at the beginning of the discussion of support and resistance is said that these levels were able to “hold back” the rate of price movement, but it does not mean that these levels will last forever. A support will no longer be able to withstand the downward movement if it turns on when the demand is no longer big enough. In contrast, the same thing will happen to the resistance, in which the supply is no longer large enough to withstand the upward movement.

 

Imagine you are standing in regards to a room. There are a floor and ceiling. Ceiling our analogy as resistance, while our analogy as a support floor. In your hands, there is a golf ball. You throw the golf ball up to touch the ceiling. If your throw is not strong enough, then the golf ball will bounce again downward.

For a novice trader, if you follow the example of another trader or trading following the way of other people who you think is more senior than you. It was not wrong, but do not ever follow the advice of others implicitly.

 

Each trader can have different views on the market. Similarly, the way of thinking, risk tolerance, and a target, of course, different too. Just because someone has a trading method that they can do well and be successful, not necessarily the method is also suitable for you. In other words, doesn’t mean you can run a trading method is well and successfully too.

 

Have your own trading plan, which according to your character as a trader, and constantly updating its line with experience you learn the market. A wise man said: “If you fail to plan, then you have already planned to fail.”

 

Build a trading plan and run it well is closely associated with the discipline. But discipline is not enough. True, it is not enough. You have to have a super strict discipline. Yes, super tight! Has a super tight discipline is the most important characters of a successful trader.

 

Super strict discipline that you need to run a trading plan that you wake up earlier. The trading plan itself is a guide on what you should do, why, when and how you will do it. The trading plan covers your personality as a trader, personal goals, risk management and trading systems will apply.

 

If you are running a trading plan with discipline super tight, then you will be able to minimize errors that occurred in the trading and by itself would minimize the risk (note the word “minimize”. We did not use the word “eliminate”). Your emotions will usually dominate yourself when your money is in jeopardy. Often people will make irrational decisions in moments like that. A good trader is not allowed to make decisions that are irrational. Trading plan was good (and super tight discipline) will keep you from making a bad decision in difficult times.

 

With a good trading plan, every decision that comes out has-considered, so that you will avoid making rash decisions in a difficult situation. All you need to do is keep to the original plan, the trading plan. There is a sentence in English that can be described easily: “Stick to the plan!”

 

Why You Need a Trading Plan?

 

It was mentioned earlier that the trading plan will protect you from making rash decisions. In addition, the trading plan will make your trading much simpler than if you did not discount trading plan.

 

Have you used Google Map facility? With Google Maps, you can find out the location of a place. If you want to travel to these places, you can simply enter your current location or enter your destination. Then Google Map will give you the best route and directions to get to the location of your destination.  You need to follow the direction so that you can minimize the risk of getting lost.

 

Your trading plan works similar route and directions were given the Google Map. He will show you where you are now and helps you to achieve your goal as a trader, namely a consistent profit.

 

Trading without a trading plan is almost as bad as traveling without knowing the direction and the destination location. Your goal is to reach trading consistent profit, but it is nonsense if you do not know how to achieve that goal. As a result, instead of obtaining a consistent profit, you are consistently destroying your trading account.

 

With the trading plan, you’ll know what you should do. You will soon know if it turns out you’re walking in the wrong direction. You will have a standard to measure your trading performance. You will always know what to do if you turned out to be ” the wrong direction”.

 

The trading plan also will help reduce the potential stress and emotional trading. Can heck, trading without a trading plan, but your trading style will be haphazard. Buy and sell signals based only on instinct or unclear. It does not trade name. That is tantamount to gambling.

Having a trading plan is no absolute guarantee that you will succeed. But at least, to have a trading plan you will be able to evaluate what is wrong with your trading if you fail.

 

In fact, due to failure in trading because they do not have a trading plan or execute a trading plan properly. This is the fact.

The majority of novice traders do not have a trading plan. Through this program, you will try to be a minority that can actually survive in the world of trading.

 

Know Your Character

 

The first step to that is needed to build a trading plan is to recognize your own character. Basic trading plan you are your own character because it is you who will run the trading plan. By knowing your personal character, then you will know what kind of trader you this. It is called the trader profile.

 

If you already know your profile as a trader, you will be able to know what kind of trading method that fits your character. Strategies, systems, or methods that do not fit with the character you would reduce your chances for success.

 

Set Objectives

Set your goals as a trader. It would be better if you also have a certain motivation that could spur the spirit and strengthen your commitment. A person will not be successful as a trader if he is a serious commitment. He will quickly crush by the market.

Remember that your goal was trading course is to obtain a consistent profit. If your goals are trading just for fun to test your nerve, then the goal will not be able to walk together with the aim to achieve the consistent profit. At any given moment you may be enjoying periods of stressful when your transaction is swayed by the market. But believe me, you will be hard to be able to show “the face of fun” when your account following market collapsed. If indeed “a fun test your nerve” that you are looking for, please do “recreational” a kind of bungee jumping or parachuting, instead of trading.

 

Set Target

 

We recommend that you set your profit targets with explicit and specific numbers. For example, $ 100 per day, $ 1,000 per month, 20% per month, 50% per month and so on. Clear targets, in turn, will help you determine which strategy you want to apply. You will be able to evaluate your trading development, whether improved or otherwise.

 

Risk Capital

 

The trading world is a harsh world. Losses for the sake of losses will probably hit you. That’s why you need to set risk limits. The term is risk capital.

 

Risk capital is the amount of money in case of “lost” you are still going to feel fine. If in the course of your trading experience loss, the risk capital is the first time will leave your account. So, even though the money is gone, you will not lose your home and your family will be fine. Thus, the magnitude of this risk capital should be according to your ability.

 

Therefore, do not trade with money that was initially to be used to pay bills or pay for the purposes of everyday life. Imagine if the money is gone because you lose money trading, might you not eat later.

 

Define Strategy

This strategy related to risk management, money management, and trading systems. In the previous chapter, you’ve learned about this trading system. Well, in the next chapter you will learn about money management and risk management so that your trading system can balance with the power of your capital.

 

For example, in a trading strategy set amount of funds used each time a transaction, the amount of risk for each transaction, the target to be achieved and what trading signal is used.

To trade in forex trading, you have to find the right time to enter or exit a position. Additionally, you must have a mental “steady” when the price target has not been achieved as desired.

 

You need discipline because it is key to gain Profit in Trading

Impulse is a system designed by Dr. Alexander Elder to be able to identify the appropriate entry point with momentum. Indicators that can measure the momentum in the market will be strong capital for traders.

 

How to open position

One indicator that can identify market is an indicator of the exponential moving average (EMA)

This indicator serves as a tool to determine the uptrend and downtrend. When EMA appears to rise, then the price will potentially bullish, and when EMA looks down, then the price will move looks bearish.

 

To measure market momentum, traders can use the histogram moving average convergence divergence (MACD), which is an oscillator that can display the rate of change in the movement of bull and bear. When the slope of MACD histogram rises, then the price will be bullish. When the MACD falls, then the price will move bearish.

 

This system will issue an open position signal when both indicators move in the same direction.

 

If the signal from the EMA and MACD histogram moving in the same direction tend to provide the information that the price is moving in an uptrend or downtrend. When the indicator EMA and MACD histogram is moving upwards, then the bullish trend will have a control on the trend, and the uptrend will accelerate. Conversely, when the indicator EMA and MACD histogram falls, then the bearish trend is in control and the downtrend will dominate the market.

 

The principles above is one way to identify points of open positions on the trade. If the period that you use are on the daily chart, then you should be able to analyze the weekly chart to determine the bullish or bearish. To determine the long-term trend in the market, you can use the 26 EMA on the weekly chart and MACD histogram on the weekly chart.

 

Having acquired long-term trend, then you can use daily charts you use to follow the direction of trade are visible on the weekly chart.

By using the 13 EMA on the daily charts and MACD histogram 12,26,9, prices will potentially give the signal for the open position.

When the weekly trend is rising, and the signal will be seen in the open position 13 EMA and MACD histogram that appears and gave a buy signal is strong enough and the opportunity you to open a buy position.

 

Conversely, when the weekly trend is moving down, wait 13 EMA indicator on the daily charts and MACD histogram gives a bearish signal. Momentum like this would be a strong signal to open short positions, and you have to close short positions when the sell signal is lost.

 

How to Close Positions

 

Doing forex trading by finding the right moment to open a position when the market is moving is an absolute requirement. As we know that prices move in trends on a weekly walk, and the best movement is the movement which regularly shows the trend of Intra – day strong enough.

As mentioned earlier, once you can identify and open trading positions with a strong enough momentum (daily EMA and MACD histogram are both moving up or down).

 

You must have the momentum right out of your open positions. Daily MACD histogram is usually (but not always) will give a signal, when the momentum is reversed and started to weaken then the moment to give the information that the positions that are currently open are likely to be shut down. Exit signal will go out when these two indicators move in opposite.

 

When the weekly trend is moving down and the daily EMA and daily MACD histogram falls, it’s time for you need to get out of long positions that have been opened in advance up to one indicator stops issuing a sell signal.

 

Exit point requires swift action and the exact moment when a trend is identified apparently soon be nearing an end.

Steve Nison popularizing the candlestick chart in America. One pattern is the tweezers candlestick introduced below (bottom) and the tweezer (top). Tweezer can be seen with different forms, but all have some common traits. This pattern sometimes appears at the turning point of the price movement.

 

In trading, candlestick charts can be used for analysis may indicate that there is a potential reversal of the direction or can be used in a wider context of market analysis to provide trading signals for a subsequent trend movements.

 

The Japanese have been using candlestick charts for commodity trade since the 17th century because they can see visually to monitor price movements.

 

Tweezer candlestick is formed with a body that is visible from the difference between the opening and closing price. If there is a “shadow” on the tweezer at both ends of the candle will be characterized by high and low prices in the period. Candle black or red means closing price close to the bottom, while the white or green candle shows the closing price closed in an upward direction and higher than the opening.

Tweezer usually located above and below, have a pattern – a pattern that indicates a reversal of the trend despite the broader context of an additional candle is usually needed to confirm the signal.

 

tweezers + tops

Tweezer above pattern often occurs when there are two tallest candle is almost exactly at the same level. Pattern tweezer under occurs when there are two candle lows that occurred at almost the same level after a decline.

Other additional criteria, usually the first candle has a great body (viewed from the opening and closing price differences) but the second candle can be almost the same size.

 

tweezers + bottoms

For example, in a pattern Tweezer above, the first candlestick candle possibility is very strong, with a high closing price, while the second may be a doji candle (cross-shaped).

 

Patterns tweezer tweezer top or bottom pattern indicates that the first candle is in a strong movement, while the second candle is a candle instead which reverses previous movement which has been a shift in momentum in the short term, and traders should know him.

 

Bearish Tweezer Top

A Tweezer Top bearish occurs when movement has formed a bullish candle is higher, and the closing price is close to the highest price (a bullish sign). But in the second candle, a candle with a reversal pattern.

 

Tweezer Bottom Bullish

Conversely, a bearish tweezer bottom occurs during the downward move when the market is bearish and the price continues to move lower, and usually near the candle closed at the lowest price (a bearish sign). But in the second candle, a candle with a reversal pattern.

 

Note:

 

Candle usually formed body with an equally high or low (this is very important).This formation is the continued downturn or continuation of price movement.
Formation tweezer tops tend to form with two or more candles.
Formations better addition is the doji or hammer that makes a second peak that will add a signal that confirms that there is a shift in market movement

 

Tweezer is a formation that is used by the forex trader or investor to know the price action movement of prices tend to follow technical patterns of the previous movement. This will create areas of support and resistance that will continue to be tested and continue to be tested. Strict discipline and risk management rules will help setup enhances the ability of traders to transact.