The trend provides guidance on the direction to trade in. For example, if the trend is down but then a range develops, preference should be given to short-selling at range resistance instead of buying at range support. The downtrend lets us know that going short has a better probability of producing a profit than buying. If the trend is up and then a triangle pattern develops, favor buying near support of the triangle pattern. Buying near support or selling near resistance can pay off, but there is no assurance that the support or resistance will hold.

Therefore, consider waiting for some confirmation that the market is still respecting that area. If buying near support, wait for a consolidation in the support area and then buy when the price breaks above the high of that small consolidation area. When the price makes a move like that, it lets us know the price is still respecting the support area and also that the price is starting to move higher off of support. The same concept applies to selling at resistance. Wait for a consolidation near the resistance area, then enter a short trade when the price drops below the low of the small consolidation.

When buying, place a stop loss several cents or ticks or pips below support, and when shorting, place a stop loss several cents, ticks, or pips above resistance.

If you're waiting for a consolidation, place a stop loss a couple cents, ticks, or pips below the consolidation when buying. When selling, the stop loss goes a couple cents, ticks, or pips above the consolidation. When entering a trade, have a target price in mind for a profitable exit. If buying near support, consider exiting just before the price reaches a strong resistance level. If shorting at resistance, exit just before the price reaches strong support. You can also exit at minor support and resistance levels. For example, if you're buying at support in a rising trend channel, consider selling at the top of the channel.

For example, if you're buying near triangle support within a larger uptrend, you may wish to hold the trade until it breaks through triangle resistance and continues with the uptrend. There is also a concept that old support can become new resistance or vice versa. This isn't always the case but does tend to work well in very specific conditions, such as a second chance breakout.

Asset prices will often move slightly further than we expect them to. This doesn't happen all the time, but when it does it is called a false breakout.

Trading the STRONG against the weak! (currency strength calc

Support and resistance are areas, not an exact price. Expect some variability in how the price acts around support and resistance. It is unlikely to stop at the exact same price as before. False breakouts are excellent trading opportunities.

One strategy is to actually wait for a false breakout, and enter the market only after it occurs. For example, if the trend is up, and the price is pulling back to support, let the price break below support and then buy when the price starts to rally back above support.

Similarly, if the trend is down, and the price is pulling back to resistance, let the price break above resistance and then short-sell when the price starts to drop below resistance. The downside to this approach is that a false breakout won't always occur. Waiting for one means good trading opportunities could be missed. Therefore, it is typically best to take trading opportunities as they come. If you happen to catch the odd false breakout trade, that's a bonus.

Because false breakouts occur on occasion, the stop loss should be placed a bit of distance away from support or resistance, so that the false breakout isn't likely to hit your stop loss position before moving in your anticipated direction. Support and resistance are dynamic, and so your trading decisions based on them must also be dynamic. In an uptrend, the last low and last high are important.

If the price makes a lower low, it indicates a potential trend change, but if the price makes a new high, that helps confirm the uptrend. Focus your attention on the support and resistance levels that matter right now. Trends often encounter trouble at strong areas. They may eventually break through, but it often takes time and multiple attempts. Mark major support and resistance levels on your chart, as they could become relevant again if the price approaches those areas.

Delete them once they are no longer relevant—for example, if the price breaks through a strong support or resistance area and continues to move well beyond it.

Also mark the current and relevant minor support and resistance levels on your chart. These will help you analyze the current trends, ranges, and chart patterns. These minor levels lose their relevance quite quickly as new minor support and resistance areas form.

Keep drawing the new support and resistance areas, and delete support and resistance lines that are no longer relevant because the price has broken through them. If you're day trading, focus on today and don't get too bogged down with figuring out where support and resistance were on prior days.

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Trying to look at too much information can easily result in information overload. Pay attention to what is happening now, and mark today's support and resistance levels as they form. Trading off support and resistance takes lots of practice. Work on isolating trends, ranges, chart patterns, support, and resistance in a demo account.

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If you are a new trader, you may have many questions.

How to Use Support and Resistance to Make Better Trading Decisions

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