Support and Resistance Strategy – Price Action Strategy
Support and Resistance is the heart of any price action strategy. A candle stick chart is a blue print of how a particular stock, commodity or currency pair behaves.
Assets move in waves , any fundamental moves are gradual, cyclical rather than escalated. To be successful in trading these behaviours need to be understood, studied and followed. In simplistic terms ‘always follow the trend’.
For this strategy you will need but a candlestick chart ( See example of a 15 min. chart of USD/JPY)
Where candles reach touch three or more times , it is a good sign a support or resistance is formed. See trendlines on the above charge. When you see a candle approaching a support and resistance. The strategy would be to wait for the candle to close . If you see the next candle starting to head towards the opposite direction.
Take a trade in that direction
For additional confirmation you can add
- Ema’s 9,12 (to see the shorter trends)
- Ema’s 50, 100 and 200 (to see major support & resistance levels that are time defined)
- Bollinger Bands- By John Bollinger
Bollinger Bands reflect direction with the 20-period SMA and volatility with the upper/lower bands. As such, they can be used to determine if prices are relatively high or low. Technically, prices are relatively high when above the upper band and relatively low when below the lower band. See example below:
Add this to support and resistance and you have a very good strategy that works almost 75% of the time bearing in mind fundamentals. This method works on all time frames but is more reliable in the higher time frames. The recommended trade is atleast 2-3 candles. So for 15 minutes , a 30 or 45 minute is recommended.
Demo test before trading live to get use to the idea. As always trade smart, be prudent and use good money management principles as like any business.
Binary Umpire Team