We have been trading using support and resistance levels. Someone calls them pivot levels, some horizontal lines, but the essence behind it does not change. We are often asked how we determine what level is strong, and what is weak? Which level we should take into account and which not ? In this article we are going to present what levels are good for opening profitable trades and what are not.
Please keep in mind that this is only our opinion and we cannot guarantee the efficiency of this method. We will show you how to do it and then it is up to you whether to use this strategy or not. For example, we often observe and take something useful from other traders and then adapts it into our own forex strategy. Apart from that, we would like to draw your attention to something else before we go directly into the consideration of levels. Most novice traders underestimate the significance of those levels. We believe that the level is the best tool for traders. If you have a price, this means you can draw a level, and that moment can be used for opening a trade. I would advise you to monitor all levels, not just those who trade on the price action.
The first thing to remember about levels is that the higher the time interval, the stronger the levels are.
This means that the level with the daily chart and the level of a 5-minute will have a completely different degree of reliability. We always start with the analysis of the monthly chart and spend a few thick layers. Then we get down on the weekly chart and the line is going a little thinner, then the day and so on until we figure out a possible trend.
The level should be obvious not only to you but to all.
Levels work so well because all traders see them and believe in them. This is a trading psychology: I see the level, you see the level and therefore we all know that the price will stop there, so we are starting to close profitable positions.The more people see the level, the more traders believe in it. In essence, support / resistance levels should be obvious.
In the analysis of the levels, it is necessary to consider something called convergence ((MACD indicator)similarities). If the level matches, for example, Fibonacci levels, circular levels, the trend line, and so on, it will amplifly the level and make it stronger.Therefore, you should always pay attention to similarities in the levels.
So let us summarize. What affects the strength of a level? Most importantly – the time interval and the additional factor called convergence (MACD indicator).We hope this will help all traders realize the importance of the levels in forex trading.