Aug 5, 2008

Getting Creative with Support and Resistance | ForexGen

Getting Creative with Support and Resistance - Forex Trading

When the basic applications of technical indicator fail to explain the current market climate, we can experiment with a new and fresh look at the charts. The following (1-hour) chart shows a steady downtrend, with its expected support and resistance levels. Since the trend is to the downside, we should place more emphasize on our current resistance level; which is drawn by connecting the two most significant high prices. Our anticipated support line may emerge as a parallel line (or our resistance line) dragged down to our most significant low price on the chart. Notice the red line measuring the entire length of the trend can be duplicated, and does a fine job at projecting our new potential support level, which may be an opportune time (and price) to take profits. This phenomenon may be explained in the fact that the ratio or discrepancy of net buyers to sellers may not change very often as the market continues to take 2.8 steps forward, and 1.3 steps back, just as an example…