Great Little Trading Trick – Using Support And Resistance


I try to push this point a lot lately, probably because it works so well for me. Using support and resistance can greatly improve you win: loss ratio. The best way to think of support and resistance is to think of magnets. Magnets can either push or pull depending on what the polarity is. Price is either drawn towards or pushed away from these key areas.

If you do a Google search you can find an indicator to plot key levels right on to the chart for you. If you'd like you can also draw lines in manually. I like to use an indicator to plot the pivot points and then draw in my key trend lines manually. Don't forget that trends lines work exactly like your key pivot points. Price is drawn towards them then pushed away.

So after you have all your lines plotted on the chart its time to get your trade on. Whenever you get a regular signal using whatever system you are using, make sure that it agrees with the key areas on your chart. If you are getting a buy signal on a strong support line you would definitely want to enter that trade. On the other hand if you were getting a buy signal just underneath a strong resistance level you might not want to take that trade until it breaks through that area.

Trend lines would be the same idea, if the trend line is up you might not want to short until that trend is broken, if the trend is down don't buy until its broken. Strong signals would be near the trend line when price is most likely to get pushed in the direction of the trend.

These great little trading tips should improve any strategy, you might miss a few trades, but you will be on the right side of many more. I personally use price action for entries, and I always look for entry signals near key levels. Its always better to have more things telling you your trade is going to be a winner.

Source by Kevin Osh

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