So What is Support and What is Resistance?

Horizontal Support & Resistance occur because of Order Flow.  People (and institutions on their or a company’s behalf) place orders into the market where they think price will turn or they want to take profits, get out of a losing trade or at a price where they wish to exchange one currency for another.

Horizontal Support occurs when there are more Buy orders than Sell orders so the Bulls win the day; horizontal Resistance occurs when there are more Sell orders than Buy orders and the Bears win the day.  Support and Resistance on a chart is nothing more than a visual representation in price and time of Buy (Demand) and Sell (Supply) Order Flow which is real people setting and executing Buy and Sell orders.  This creates horizontal Support and Resistance, nothing more and nothing less.

When price moves up and down in waves in the market the swing highs and swing lows create wicks on candles (fractals) where one can draw trend lines, be they Support trend lines or Resistance trend lines.  Trend lines should be drawn connecting these fractal wicks and should not cut through the body of a candle on a chart.  The next thing to understand is that order flow created the wicks on the candles, which created the fractals and thus diagonal trend lines if drawn correctly are also a representation of Supply and Demand Order flow and thus Support and Resistance.

Top Tip: When looking at your charts think about Supply and Demand and Order Flow and where orders are likely to be placed and consider the use of trend lines alongside horizontal Support & Resistance, it might help with your trade planning and when and when not to pull the trigger.

Copyright Forex-Crazy.com 2011.  All Rights Reserved.

Look Left & Stay Safe!

One of the most basic things a trader needs to learn inside out is how to determine and then use Support & Resistance to plan and execute their trades. 

When we want to cross a road safely we look to our left and right and the order we do that depends on what side of the road traffic drives on.  When trying to plan and execute trades we need to know where key levels of support and resistance are to make sure we don’t get run over by the market.  We are trading the Right Hand Edge of the charts and are not 100% sure what price will do next, so before we look right we must always:

LOOK LEFT

on our charts and identify past significant horizontal support and resistance and trend lines in the timeframes which could  impact upon our intended trade.  Once that is done and marked up on our charts then and only then should we look right, and have a more informed view of likely price action and hopefully stay safe when taking our intended trades.

Top Forex Trading Tip: Often past horizontal support and resistance will create small zones where price may react in the future, also where the bodies of candles actually close can be key levels.

Copyright Forex-Crazy.com 2011.  All Rights Reserved.

How to Make Your New Year’s Resolution a Reality!

So Christmas is over and the New Year has started and you’ve made your New Year’s Resolution:

‘I’m going to learn how to trade Forex!’

Then what?  If, like many others, you are psyched up and raring to go but don’t know where and how to make that resolution become a reality, then stick with me and read on:

Firstly you might want to tweak your resolution and add ‘and be consistently profitable’ on to the end of your New Year’s Resolution, because you no doubt are doing this to make money.

Around 95% of people fail in their attempt to become consistently profitable Forex traders for a myriad of reasons, please don’t let that be you.  Also, you will probably need to temper your expectations regarding time scales to achieve your goal as it may take anything from a year to as many as 3 years or so to really make the grade.  One way to fast track your progress is to get yourself a Forex mentor, someone who is a successful Forex trader and also an honest straight talking teacher and mentor, they do exist!  This will cost but it will be money well spent, plus you will get to see what they are trading too.

The key elements to learning how to become a consistently profitable Forex trader are:

• Open a Demo Account.
• Get some lessons, attend a workshop or seminar or enrol in an online course.
• Get a Forex Mentor/Tutor:
• Understand the Basics
• What moves the currency markets?
• Basic Fundamentals and news flow
• Support & Resistance
• Price Action
• Basic Technical Analysis
• Learn Top Down/Bottom Up
• Ask Why, What, When and How and Google everything.
• Prepare for your lessons and ask intelligent questions.
• Get some good Forex trading strategies.
• Practice, practice, practice and learn how to Back Test your Forex trading strategies.
• Learn to trade in the context of the differing timeframes.
• Decide what type of Forex Trader you want to be and what times of the day do you want to trade to suit your lifestyle.
• Learn about and implement the 3Ms (Money Management, Method and Mind).
• Learn about the 5 Ps (Prior Planning Prevents Poor Performance).
• Be Honest with yourself and be Accountable for your Forex trading actions to someone else – get an Accountability Partner.
• Keep a Trading Journal and note your trades and observations as you progress.
• Develop (the) Patience (of a Saint) to wait for your chosen strategies to setup and don’t force trades.
• Demonstrate (the) Discipline (of a Soldier) in executing your chosen strategies to the letter.
• Always, always use a STOP LOSS but you need to know where to place it.
• Learn to love your losses – every Forex trader has losing trades.
• Learn that No Trade is sometimes the best trade.
• Be selective in which trades you take – often less is more!
• Learn to minimise your losses and maximise your gains – this is NOT easy and requires mental fortitude.
• Don’t open a live trading account until you are consistently profitable in a Demo account over a period of at least 6 months if not a year.
• When you do open a Live Forex trading account start off with a Micro-Account, because when you blow it up (as most do) you should be able to reseed it with minimal pain and also make sure it is sufficiently capitalized.
• Learning how to trade Forex is more of a marathon than a sprint so pace yourself.
• There is no substitute for experience in this game especially as the Forex market conditions can change quickly, so learn as much as you can from your Forex Mentor.
• Experience can also be gained from others – so don’t trade alone, try and find a group of like minded people to trade alongside with this can help you be more disciplined and you will learn from them too, we offer a Live Trading & Education Room and Skype thread where you can do just that 24/7.
• WARNING:
• When you start don’t set you sights too high – be realistic.
• There is NO one Golden Button/Indicator/Robot or one perfect method to make millions in Forex.  You have to build up a tool kit.
• 99% of all indicators are lagging – Price action is key!
• Trading Forex live is often different to that described in text books and is an art rather than a science and requires judgement on a case by case basis.
• Forex Trading can be addictive so be aware of that and remember that there are other things in life besides Forex.
• Don’t stare at your screen all day – learn how to set Alerts and then go and do other stuff whilst waiting for trades to setup.
• No one can really afford to lose money, so any money used to trade Forex should be Risk Capital in addition to your savings etc.

If, after reading the above, you are still interested in learning how to trade Forex then we might be able to help you realise that New Year’s Resolution at Forex-Crazy & FxTribe.  

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Forex-Crazy & FxTribe wishes everyone a prosperous and Happy New Year!

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Copyright Forex-Crazy.com & FxTribe.com 2011.  All Rights Reserved.