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Trendlines, Support & Resistance Lines

Discussion in 'Candlestick Patterns' started by Angela_Riplay, Oct 23, 2015.

  1. Angela_Riplay

    Angela_Riplay Forum Member

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    Support and Resistance Lines

    Support and Resistance Lines can be both horizontal and sloping.

    Resistance Lines are drawn through previous pivot highs. Resistance acts like a ceiling.

    Depending on its strength, a resistance line can pause an uptrend and when very strong can reverse an uptrend. Its strength is determined by the length of time it serves as resistance and the number of times it has been touched by price. The longer the period of time, the greater the strength of the line. Some traders will sell at resistance lines.

    Support Lines act like a floor and are price areas where a currency pair finds it difficult to penetrate below the Support Line. Support lines are drawn through a previous set of lows and can either pause a downtrend or reverse it depending on the strength of the Support Line. Some traders buy at Support Lines. All Traders see the same thing.

    Do not BUY close to RESISTANCE LINES.

    Do not SELL close to SUPPORT LINES.

    As there is a good chance there will be reversal

    upload_2015-10-23_9-59-23.png


    Trendlines

    It is important for traders to know which way the market is going, i.e. is it trending up or down or even going sideways. Money can be made in all these conditions, but it is important that traders "Trade with the Trend"

    A trendline is straight line that connects key prices areas in a move, an up trendline connects successive Higher Lows or Higher Highs and a down trendline connects successive Lower Highs or Lower Lows. Trendlines connecting successive Lower Highs is also known as a resistance line while a trendline connecting successive Higher Lows is also known as a support line.

    Trendlines can be defined as border lines for making buy or sell decisions. Trendlines form the boundary lines for most of the chart patterns as will be seen in later sections.

    A Trendline of about 45 degrees is considered the most reliable, and if steeper than that the market typically cannot sustain that kind of momentum for long. Watch to see if the market bounces off a trendline or slices through. Watch for retests of the trendline after the price has sliced through.

    You will often find good buying or selling points at the 3rd touch of a trendline

    upload_2015-10-23_9-59-45.png

    upload_2015-10-23_10-0-5.png

    upload_2015-10-23_10-0-21.png

    Channels

    When prices trend between two parallel trendlines they form a channel. When prices hit the bottom trendline, this may be used as a buying area and when prices hit the upper trendline, this may be used as a profit taking area and vice versa.

    Breakouts of trendlines and support and resistance lines provide good areas for buying or selling.

    Channels can be upward or downward sloping and horizontal.

    upload_2015-10-23_10-0-53.png

    upload_2015-10-23_10-1-7.png
     
  2. amittimothy

    amittimothy Well-Known Member Trader

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    Forex Support and Resistance
    Support and resistance is one of the most widely used concepts in forex trading. Strangely enough, everyone seems to have their own idea on how you should measure forex support and resistance.

    Let’s take a look at the basics first.
    [​IMG]
    Look at the diagram above. As you can see, this zigzag pattern is making its way up (bull market). When the forex market moves up and then pulls back, the highest point reached before it pulled back is now resistance.

    As the market continues up again, the lowest point reached before it started back is now support. In this way, resistance and support are continually formed as the forex market oscillates over time. The reverse is true for the downtrend.

    Plotting Forex Support and Resistance
    One thing to remember is that support and resistance levels are not exact numbers.

    Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it. With candlestick charts, these “tests” of support and resistance are usually represented by the candlestick shadows.

    [​IMG]
    Notice how the shadows of the candles tested the 1.4700 support level. At those times it seemed like the market was “breaking” support. In hindsight we can see that the market was merely testing that level.

    So how do we truly know if support and resistance was broken?
    There is no definite answer to this question. Some argue that a support or resistance level is broken if the market can actually close past that level. However, you will find that this is not always the case.

    Let’s take our same example from above and see what happened when the price actually closed past the 1.4700 support level.

    [​IMG]
    In this case, price had closed below the 1.4700 support level but ended up rising back up above it.

    If you had believed that this was a real breakout and sold this pair, you would’ve been seriously hurtin’!

    Looking at the chart now, you can visually see and come to the conclusion that the support was not actually broken; it is still very much intact and now even stronger.

    To help you filter out these false breakouts, you should think of support and resistance more of as “zones” rather than concrete numbers.

    One way to help you find these zones is to plot support and resistance on a line chart rather than a candlestick chart. The reason is that line charts only show you the closing price while candlesticks add the extreme highs and lows to the picture.

    These highs and lows can be misleading because often times they are just the “knee-jerk” reactions of the market. It’s like when someone is doing something really strange, but when asked about it, he or she simply replies, “Sorry, it’s just a reflex.”

    When plotting support and resistance, you don’t want the reflexes of the market. You only want to plot its intentional movements.

    Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several peaks or valleys.

    [​IMG]
    Other interesting tidbits about forex support and resistance:
    • When the price passes through resistance, that resistance could potentially become support.
    • The more often price tests a level of resistance or support without breaking it, the stronger the area of resistance or support is.
    • When a support or resistance level breaks, the strength of the follow-through move depends on how strongly the broken support or resistance had been holding.

    [​IMG]
    With a little practice, you’ll be able to spot potential forex support and resistance areas easily. In the next lesson, we’ll teach you how to trade diagonal support and resistance lines, otherwise known as forex trend lines.

    Hope this Article helps a lot of members here :) Cheers ..












     
  3. amittimothy

    amittimothy Well-Known Member Trader

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    Are You Trading with Candle Power?
    Hello traders! This week’s newsletter will give you a bit of insight into the power of candlestick charts, especially when applied to your largest timeframes. Let’s get started on how to read candlestick charts and when to use them!

    First of all, candlestick charts show us four pieces of information, they are:

    1. The open (or first) trade of the time frame you are looking at

    2. The high – highest priced trade for that timeframe

    3. The low – the lowest priced trade for that timeframe

    4. The close (or last) trade of the timeframe you are looking at. If the candle body is green, the bottom of the body is the open and the top of the body is the close; if the candle body is red, the open is the top of the body and the close is the bottom of the body. The “wicks”, “shadows”, or “tails” show how the highs and lows are placed in relationship to the open and close.

    5. There are numerous Lessons From the Pros articles written about the basics of how to read candlestick charts. If you are new to them please dig a little and then come back to this piece.

      At Online Trading Academy we believe that you should be looking at several timeframes to formulate your plan for any individual trade. This week, I’m going to focus on using weekly candlestick charts to help us get an idea of what will happen over the following few days of the next week. Generally, I want to know what the weekly charts are doing because it gives me a HUGE hint on what the big institutions are doing with their trades/positions. I’m not too concerned with 5 minute candles; when you start looking at small timeframes like 5 minutes, you end up trading too often (at least I do). Personally, I would rather ride the coattails of long term institutions than sit at my trading screen for most of the day!

      There is an old phrase in trading: “Amateurs control the open and pros control the close.” Hey, it even rhymes! What I want to see is the CLOSE of a candle very near the highs, or a close very near the lows. I also prefer the candle itself to be larger than the previous candle. Notice the red candle marked “1”. Its high was higher than the previous green candle’s high, and the low was lower – hence a bigger candle. See where the red candle closed? Almost at the very bottom of its entire range. Also, it closed lower than the previous two candles’ lows. This is a small hint that there is an imbalance building in our supply and demand equation, probably to the downside. Here is the lesson: a very low (or very high) close relative to the range of the candle very often points us in the direction of the FIRST HALF of the next candle. Said another way, when a weekly candle closes at/near the very low, the first few days of the next week will more than likely go lower as well.

    • [​IMG]

      Now notice the red candle marked “2”. Many new traders will say that any red candle is bearish, but they would be incorrect. This particular candle is actually very bullish. As stated before, each candle shows the open, close, high and low. Notice the close vs. the low; that was a very strong move to the upside! As far as I’m concerned, there just wasn’t enough time in the week to close higher than the open, which would have given us a green candle. Notice how even the next candle (green) closed near its high, which leads us to believe the next candle will go in the same direction. Also, the very large next green candle closed near its high, leading us to believe the next candle would at least start off in the same direction.

      Another helpful hint with these larger timeframe candles is to look at the lows of the candles in uptrends and the highs in downtrends. In both uptrends marked, the weekly candle lows had higher lows for several weeks at a time. Now, I’m not saying you would have bought the bottoms and sold the tops, but the first trend lasted from about 168.00 all the way to 189.50, and the second uptrend went from 175.00 to about 195.50. Not bad if you can pull out a chunk of those moves by paying attention to the weekly candle hints! In downtrends, pay attention to the candle highs. As long as the highs are still lower, this would lead you to believe that the downtrend is still intact. The two downtrends marked went from 187.80 to 175.70 and 185.00 to 175.00.

      Obviously, no trend lasts forever. As the students of Online Trading Academy and the long time readers of these Lessons know, an uptrend will usually end at a significant supply zone and a downtrend will usually end at a significant demand zone. My hope is that by using these two candlestick charting hints, you will be able to pull out more pips when your chosen market is trending!
     
  4. amittimothy

    amittimothy Well-Known Member Trader

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    I hope any members here who were newbie must have learnt and tested these Valuable information on their Real Trading account as well observed some great results too..
     
  5. amittimothy

    amittimothy Well-Known Member Trader

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  6. amittimothy

    amittimothy Well-Known Member Trader

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  7. amittimothy

    amittimothy Well-Known Member Trader

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  8. amittimothy

    amittimothy Well-Known Member Trader

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    Forex traders are able to identify several places to trade with the trend. The levels of resistance can be used as profit target areas or breakout opportunities as price closes above resistance. On the other hand, levels of significant resistance provide ideal entry points in a downtrend. by the way not not opening a Demo account with Forex mart .

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  9. amittimothy

    amittimothy Well-Known Member Trader

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