👇 SUBSCRIBE TO MY NEW FOREXVISIT CRYPTO YOUTUBE CHANNEL NOW 👇SUBSCRIBE TO FOREXVISIT YOUTUBE CHA. Advanced Support Resistance And Trendlines Afl - wiselasopa Trend Line Resistance Trend Line Support Resistance. Trendline support resistance provides an excellent buy/sell signals in trending market. On an uptrend, buy around the support trend line level and place a stop order below the trend line.

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In technical analysis, support and resistance represent the critical point where the forces of supply and demand meet. The other key points of TA, such as price patterns, are based on support and resistance points.

A support line refers to that level beyond which a stock (or currency pair) price will find buyers and chances of it (security) will not fall. Therefore, it denotes, the price level at which there is a sufficient amount of demand.

Similarly, a resistance line refers to that level beyond which a stock (or currency pair) price will find sellers and chances of it (security) will not rise. It indicates the price point at which there is sufficient amount of supply available to stop and possibly, for a time, turn upward trend.

Kinds of Trends

In the forex market, trends reflect the average rate of change in price over time. Trends exist in all markets (Equity, FX or commodity) and in all time frames (minutes to multiyears). A trend is one of the most important aspects, which traders need to understand. The traders should analyse which way the market or security (stock, currency pair) is heading and should take position based on that.

Following are the different types of trends in the forex market −

• Sideways trends (range bound)

• Uptrend (higher lows)

• Downtrend (lower highs)

Sideways Trends

Sideways trends indicates that a currency movement is range-bound between levels of support and resistance. It usually occurs when the market does not have a sense of direction and ends up consolidating most of the time in this range only.

To identify if it is a sideways trend, traders often draw horizontal lines connected by thehighs and lows of the price, which then form resistance and support levels. Clearly, marketparticipants are not sure of which way the market will move and there will be LITTLE or NO rate of price change.

Uptrend

An uptrend signifies that the market is heading in the upward direction, creating a bullish market. It indicates the price rallies often with intermediate periods of consolidation or movement (small downward move) against the major (prevailing) trend.

An upward trend continues until there is some breakdown in the charts (going down below some major support areas). If the market trend is upwards, we need to be cautious on taking short position (against the overall market trend) on some minor correction in the market.

Another way to figure an upward trend of market or currency price is shown below −

Above the primary waves move the currency pair (USD/INR) in the direction of the broader trend (upward move), and secondary waves act as corrective phases (minor correction in currency, downward) of the primary waves (upward).

Downward Trend

A downward trend in the forex market is characterized by a price decline in the currency pair (USD/INR), with slight upward swing for a period of consolidation against the prevailing trend (downward trend). Unlike upward trend, a downward trend results in a negative rate of price change over time. In a chart, the price movements indicating a downtrend form a sequence of lower peaks and lower lows.

As currency is always traded in pair, the downtrend in forex market is not much affected as other financial markets. In case of downtrend of a currency pair (USD/INR), the fall in price of USD gives way to a rise in price of INR. It means something is always going up even in times of financial or economical downtrend.

Another way to look at the downward trend figure is in the form of primary (major trend) and secondary (minor correction) wave, as shown in the diagram below.

In the above figure, the primary wave (downtrend) moves the currency pair in the direction of the broader trend (downward trend), and secondary waves (uptrend) act as corrective phases of the primary waves (downtrend).

Percentage Retracement

A retracement is a secondary wave (temporary reversal) in the direction of a currency that goes against the primary wave (major trend).

Like all other financial markets, foreign exchange market too does not move straight UP or DOWN, even in the strong trending market (Uptrend or Downtrend market). Traders keenly watch several percentage retracements, in search of price objective.

The amount of prices retreat following a higher-high (or higher-low) can be measured using a technique called “percent retracement”. This measures the percentage that prices “retraced”.

For example, if a stock price moves from the one year low of INR 50 to a recent high of 100 and then retraces back to 75 INR, this backward movement of prices from 100 INR to 75 INR (25 INR) retraced 50% of the previous move from 50 INR to 100 INR (100% upward journey).

Percent retracement is strategic for Technical Analysts as based on this they determine the price levels at which prices will reverse and continue upward afterward. During any strong bull or bear market, prices often retrace from 33% to 66% of the original move. Retracement of more than 66% nearly signifies an end to the bull market.

The Trendline

The basic principle of technical analysis is that we can identify future trends and to some extent the duration of that trend (upward or downward). During a bull market, we see a series of higher (upward or primary wave) highs and correction lows (downward or secondary wave) and in a bear market, lower downswings (primary wave) and correction highs (secondary wave).

Drawing trendlines correctly is the legitimate extension of identifying the support and resistance levels and providing opportunities to open and close positions.

Trendlines are drawn at an angle above or below the price.

The above chart shows the trendline with downward and upward trends for a EUR/USD currency pair. In addition, we can the following in the chart −

• Three swing highs on the downtrend

• Three swing lows on the uptrend.

Therefore, when drawing trendlines in a downtrend, we draw them above the price and when drawing trend lines in an uptrend, we draw them below the price.

During a downtrend, it is the high point and in uptrend, it is the low point that will determine a trend line.

For confirmation, we require at least three swing highs or three swing lows to draw a trend line in either direction (uptrend or downtrend). Higher the number of times the price touches a trend line, the more acceptable it is, as more traders are using it for the support and resistance levels.

Using trend lines to trade

Most traders frequently use two methods to trade using trend lines −

• Entry or exit when the price finds support or resistance at the trend line.

• Entering when the price breaks through the trend line.

Trend line as support or resistance

As support is equal to demand and resistance signifies supply, it is the imbalance between supply and demand, which triggers price movement. If both supply and demand are static, there will be no price movement. Security prices stop falling and reverses when support/demand is below the current price. Similarly, security uptrend will stop its upward journey when resistance/supply is above the current price.

So in up trending market, each new resistance (higher levels) will be set. If the security(equity or currency pair) or market is in uncharted territory, there is no resistance level set (can reach any new high).

Support and Resistance Levels in Uptrend

Similarly in a downtrend, the security (equity or currency pair)/ market is making new lows thereby going below the multi support levels. If the security/market is in downtrend and going down below all-time lows, finding exact support levels is not possible (only way is to go with retracement levels.)

Support and resistance play an important role in successful trading. These levels indicate at what moment the price of a share or Forex pair is likely to move in the opposite direction. You can use these levels to find a good time to open a trade or investment.

What are support & resistance?

• The support level is a low level that the price cannot seem to break through (bottom).
• The resistance level is a high level that the price does not seem to be able to break through (ceiling).

The interesting thing about support & resistance is the fact that as soon as these levels are broken, they often switch. An old support level can then switch to a resistance level and a resistance level can then switch to a support level.

Resistance and support show the battle between buyers and sellers. Breaking this level could indicate a trend reversal.

The struggle between buyers and sellers

Every second of every day buyers and sellers compete. This applies to all securities: it does not matter whether you trade in stocks or Forex. The price will therefore never move in a perfect, straight line.

There is always a certain degree of resistance in a rising trend. People who take their profits and sell their positions put pressure on the rising trend.

There is always a degree of support in a downward trend. At low prices, more people are interested in getting in, so that the price can rise again.

You see this pattern in every price movement. The price is moving in a dominant direction. We also call these dominant movements impulses. However, the price regularly moves in the other direction in between. We call these movements in the other direction retracements.

How can you invest at these levels?

There are two ways in which you can use support and resistance levels for your investments.

Trade on the bounce

• You open a position when the price falls to a support level.
• You open a position when the price rises to a resistance level.

Trade on the break

• You open a position after the price breaks through the resistance.
• You open a position when the price falls through the support.

Trading on the bounce is easier for many people as these patterns last longer. As a result, it may be easier for the novice investor in Forex and stocks to trade with the trend.

Testing levels

Resistance levels and support levels are not an exact science. It therefore regularly happens that a level is temporarily broken and then returns to the old pattern. We also call this a level test. Therefore, always pay close attention to whether a level has been broken, or whether there is a so-called false breakthrough.

Recognize the levels

Before you start investing with support and resistance levels, it is important to understand a few things. You have to remember that after a breakthrough, a resistance level can become a support level. When a level is touched often without being broken, the strength of this level increases. It is advisable to practice with these levels so that you learn how these concepts work.

You can use horizontal levels and trend lines to display these types of levels on the graph. In the rest of the article, we’ll take a look at how this works.

How do you use horizontals?

Horizontal levels are powerful. A horizontal level is a level where the price has made multiple touches without breaking through. Horizontal levels are so powerful, because many people keep an eye on these levels. Professional investors monitor whether these levels are breached. When this eventually happens, many investors take a position. It is precisely because so many investors use these levels that they work. You can only use a horizontal level when there have been several touches.

Only with a strong horizontal level in combination with the correct candlestick is it wise to open an investment position. In the example below, the USD JPY currency pair has been in an uptrend for a long time. In this situation you should look for a good moment to open a buy or long position on the currency pair.

At a horizontal level, the chance of a bounce (the price bounces off the level) is high. When this horizontal level was tested by a low test and the price closed above the level again, there was enough reason to open a trade. This ultimately yielded a good result!

Waiting for a retest in case of a breakthrough

Horizontal levels can sometimes be very strong and a false breakthrough is therefore not unlikely. Before you take a position because of a breakthrough, it is therefore, wise to wait for the retest. A retest is a second touch of the horizontal level, after which the price does not fall back to the old level, but continues to develop.

After a break of the resistance level, the resistance level often turns into a support level. The other way around, this is also the case: if the support level breaks, there is a good chance that this level will now become a resistancelevel. Below you can see an example of a breakthrough and a retest on which I took a short position.

The price clearly moved in a consolidation initially. The price broke the strong support level and has now tested this level with a train tracks candlestick pattern. The price closed below the level, so a short position seems like a good idea!

How do you trade with support & resistance?

You now know you can use horizontal levels and trend lines to indicate the areas of support and resistance in price developments. But how do you achieve the best investment result with stocks and Forex by using these levels?

Trading the bounce

The best way to take a bounce position, is to place the order after you are sure the bounce is about to occur. Therefore, do not place the order blindly on the resistance or support line.

It is wiser to wait for the price to hit the support or resistance level. You can then place an entry order a bit away from this level in the direction of the trend (E). Only when the price bounces off the level, you will open a trade by triggering the entry order. For protection, you can place a stop loss on the other side of the support or resistance level (SL). If the price moves in the other direction, your trade will automatically close protecting you from a potential loss.

The breakthrough

You can also achieve good results with a breakthrough. If you are a more aggressive speculator, you can place an entry order (E) directly below the level. You then place the stop loss on the other side of the level (SL).

Cached

The more conservative and safer trader only takes a position on a so-called pullback. A support level or resistance level is often tested before it is definitively broken. By applying a more conservative trading strategy, you may miss out on some profitable investments. At the same time, you also reduce the chance of losing money on your trade.

It is important to remember that Forex pairs and stocks do not always move according to these predictable patterns. Therefore, it is smart to always use a stop loss! By doing so you avoid losing a good deal of your deposit because you trade on nothing but futile hope.

Trend lines: additional confirmation

You can use trend lines to determine the general direction of the price. By drawing a trend line, you can determine whether it is wise to buy or sell the currency pair. Trend lines can also be used to identify a potential bounce, which is an attractive moment to open a trading position.

Trend lines in combination with other technical indicators can provide a strong basis for taking trades. Keep in mind that trend lines mainly indicate general movement, and that it is important to use other indicators as well when you open an investment. Trend lines are not strong on their own, so use them in combination with a horizontal level!

Major Support Resistance Trend Line - Afl Code

How do you draw trendlines?

It is straightforward to draw a trend line within MetaTrader. To do this, press the oblique line in the toolbar and place it with your mouse on the line where a trend line can be recognized. The trend line must connect the lowest points in an uptrend and the highest points in a downtrend. A minimum of three touches is required to be able to speak of a strong trend.

Advanced Support Resistance And Trendlines Aflac

In a consolidation there is no clear trend. You cannot use trendlines in this case. A trend line is only useful when an up or downtrend can be identified. Within MetaTrader you can also draw horizontal levels: press the straight line at the top of the toolbar. You can use horizontal levels within a consolidation.