Combining Trendline and Horizontal Levels - Support and resistance Forex Trading Strategy

 Many beginner traders are aware of using trendlines and horizontal support and resistance levels individually but do not use them effectively enough together...

In this blog post I want to explore the steps to take to combine them and then use real time examples to show you how this can be applied in the markets.

Here Is A YouTube Video That Will Give You A 5 Step Forex Support And Resistance Forex Trading Strategy...

An Easy To Follow 5 Step Forex Support and Resistance Strategy

Step #1 - Line Chart

So, the first step is to ensure that you have a line chart selected as opposed to a candlestick chart. Whilst candlestick charts can be useful for a lot of situations, especially later in the strategies, a line chart is a lot clearer at this point.

Step #2 - Determine The Trend

A lot of beginners make the mistake of looking for the horizontal support and resistance levels first - this is a mistake because you can spend a lot of time finding the best horizontal support/resistance levels in the world, but at the end of the day there might be no trend to trade!

So, an uptrend is confirmed when you are able to draw a line through 2 higher lows and a downtrend is confirmed when you are able to draw a line through 2 lower highs. take a look at the downtrend example below:

In this image we can clearly see that a line can be drawn through 3 higher highs on the Euro/Us Dollar pair confirming that this is a downtrend. You can also see that ensure maximum clarity a line chart has been used.

Step #3 - Determine Support and resistance Horizontal levels

Now, here is where you need to correctly identify support/resistance levels. To do this look for areas on the chart where support/resistance has occured at least 3 times - this is counted as a major level and price will likely pause again at this level. Have a look below at our chart:

As you can see above there are 2 major support/resistance levels and we can see that price has broken through and retraced to the first one.

This could be a potential trade and many traders would take this opportunity. However, the safer option is to wait to see if price retraces further - it is likely that, if it does, it will retrace to around the point where the second support/resistance line meets the descending trendline - if this area holds then this will represent an excellent trading opportunity. 

In the end it is down to you which option you would take but....

Always remember guys, whichever trades you are taking make sure you use a stop loss!

Ok, thank you for reading this blog post - I hope you found it useful. Follow me to be notified of all my blog post updates which will happen each day!

until next time...