Any swing high on the chart is regarded as a resistance level.

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Again, here the more pronounced the swing high is the more significant the resistance level usually is. A critical thing to understand is that support and resistance act as zones on the chart rather than as clear-cut levels. Instead, you use the zone around that level as a support zone and you look for buy signals in that rough zone. Depending on what timeframe you are viewing this support level on, the zone may be 10 pips for intraday charts and 50 — pips for the weekly or monthly chart.

One way to increase the probabilities that a buy or sell signal is valid is to wait for the close of the trading session before taking the trade. So, very often the market will break a support zone during the session, but then will close back above it at the end of the session. This is a support zone that held even though intraday it was broken. Basically, there are two fundamental ways one can trade support and resistance.

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This is the situation where the trader waits for the price to reverse off the support or resistance zone, and then he enters on that bounce in the price. Getting a reversal pattern, or a confirmation signal from an indicator is an additional clue that the trade will be successful. This is sort of the opposite of reversal trading. Here the trader waits for the price to break a support or resistance zone and then he enters in the direction of the breakout.

Another great way to trade the support and resistance zones is to trade pullbacks.

What Types of S&R Levels Exist?

A pullback happens if there is a resistance that is broken and becomes a support. A general rule says that broken resistance can become a support, and broken support can become a resistance. Possible pullbacks are highly effective entry signals. You get the point - support and resistance analysis has no limitations. You can develop a complete trading strategy based on trading entirely the support resistance zones. Support and resistance levels are widely used tools in the forex market.

Classical Support and Resistance

Do you know you can trade intraday using support and resistance levels? In this article, we will see a complete intraday trading strategy using support and resistance levels with entry-exit and money management techniques. Price action is a powerful tool for technical analysis that is used by most of the professional traders.

The main difference in price action trading with other trading methods is that it ignores the amounts of indicators from the charts. Support and resistance is an important tool that is used by most of the price action traders in the forex market. However, support and resistance are not a level or zone only. You can use it for intraday, swing as well as position trading. The concept of support and resistance trading is the same for every market, whether it is Forex, Stock or Crypto trading.

In a regular Forex chart, we normally see these levels as a horizontal line or area from where the price is possibly likely to reverse.

How to Trade Support and Resistance in the Forex Market

But a trader should ask himself why the level is so important and what makes the level react as a potential reversal zone. In a normal market, when we buy something, the price goes up as the demand increases. This is a basic economic term called Supply and Demand. Similarly, the price goes down when the supply increases. In every market, when a price breaks any important support or resistance level, it creates panic for the traders who make losses.

How Classical Support and Resistance Levels work in Forex

For example, in the above-mentioned picture, we can see the panic of sellers at the question marked area. It was a happy ranging market, so buyers and sellers were able to make a profit by selling from high and buying from low. As traders make losses, they set it to their memory that they may face loss again if the price reaches that level.

Hence, the level becomes important. Therefore, traders consider those levels as important support or resistance. So, it is very important for a trader to understand the concept behind the support and resistance trading rather than believing it as a simple horizontal zone. Most of the institutional traders trade in larger timeframes. Banks, Hedge funds, Financial institutes, Insurance companies do trade in a daily time frame mostly.

Therefore, support and resistance work well in larger time frames. However, do you know you can trade intraday using support and resistance levels? Below, we will see the step-by-step approach of the intraday trading techniques using support and resistance levels. What do key support and resistance levels mean?

How do you find them? If you zoom out your trading chart and move to a daily and weekly timeframe, you will see some levels that are at the top or bottom of your chart. From those levels, you can see how prices moved up and down.

What support and resistance levels are most valuable? - Admirals

As those are in higher time frames, it will take a longer time to take trades from those levels. Therefore, as we are trading intraday, we will ignore those levels in our trading. The only reason to use those levels is to measure the price direction. The larger players are in higher time frames.

So whatever trade we take, we should ensure that we are going with them, not against them. Before going to the intraday chart, we will move our journey from key levels, and then we will find important event levels. Event levels are very important as the main trading activity of larger players happens from that level. In the daily and 4 hourly charts, you may see some levels to work as support and after breaking the level it works as a resistance.

This means it changes the motivation of traders from buyers to sellers or from sellers to buyers.