How To Generate Forex Signal Trade Based On Support And Resistance
We can say that support and resistance is the base of the whole forex trading science.This
is a very basic strategy to generate signal trade on forex charts.It has proven to be very successful and it has been in use by technical trades for many years.The term support is a technical term used to define the line on any chart which would establish the support level,lower area of the price.Support can be drawn as a horizontal line but it can also be a sloped line following the trend.An important thing to remember while placing a forex signal trade based on such a formation is the fact that the support as a resistance is an area more that the exact line.It could range within twenty or so pips.You should consider this fact when an alert has been given by the price to place a forex signal trade.You have to consider the false break of the support.
We still can construct a forex signal trade based on such an alert.The important rule is that you buy when the price touches the support line for the top side.The support line would define the level of bears and give us an alert,a trading signal that the price might now be on the way back and it would be expected to rise.The principle of placing the forex signal trade based on the alert given us by touching the support line is the same as trading a forex signal trade based on trendlines.You would construct your signal trade away from support line and place a long trade.
Place your stop loss on the other side of the support line.As soon as the support line is broken to the down side this is an alert for trend change and a signal to generate a reverse forex signal trade.When this happens,the support area becomes the resistance area for the new price trend.
A similar principle when placing a forex signal trade applies to resistance lines.The term resistance is also used in technical forex analysis and applies to all lines established on the top edge of the price and would define the bull power.On the resistance level the price would be expected to drop.It also would give us an opportunity to place a forex signal trade based on such a forex alert.
You would use the same principles as trading support lines.As soon as an alert is visible,place a forex signal trade based on touch of the resistance line from the bottom side and place a short forex signal trade.Keep your stops above the line.The break of such a line would indicate a trend swing and the resistance becomes the support for a new price range.
The forex signal trading based on the above theory simplifies all calculations involved and provides a clear profit-loss forecast.It is free from disadvantages of practical signal trade methods based on past alert indicators.There is no fluctuation or smoothing effect. However you would have to consider that false breaks are possible.
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