Forex : Forex Day Trading
Support and Resistance
Why are support and resistance levels crucial when participating
in the Forex day trading market?
Simply put, they represent key, strategic price points
at which traders processed orders involving millions or
even billions of dollars. No wonder price at times has a
hard time getting past a previous high or low. Those levels
are being fiercely defended by traders who have large amounts
of money at stake and who do not want to see price break
For this reason anyone who engages in Forex day trading
should learn how to trade support and resistance. The following
checklist provides crucial guidelines:
1. Support and resistance levels are much more significant
on the higher time frames. Pay particular attention to price
highs and lows on the daily chart as this time frame is
commonly used by big traders.
2. A price high or low has more significance when it has
a number of candles either side of it which are lower (in
the case of a price high) or higher (in the case of a price
3. Before you consider Forex day trading at a support or
resistance level, see if there are more factors that would
indicate this is a key price level.
For example, does a trendline intersect at the same point?
Does the support or resistance line match up with a Fibonacci
level, either a retracement or an extension? Does the support
or resistance level coincide with a pivot point if you are
in the practice (and it's a wise one) of calculating pivot
levels when Forex day trading?
4. Has a key support resistance level been broken? Then
look to see if price will come back to test that level.
Remember, resistance once broken can become support in the
future and support once broken can become resistance in
These Forex day trading scenarios can present excellent
trading opportunities as you put an entry order in at the
key level and wait for price to come back and pull you in.
Within a short time your dealing spread is covered and you
are in profit.
5. The market spends most of its time in trading ranges
or consolidation channels. You need to accept that this
is a characteristic of Forex day trading and adjust your
mindset accordingly. Identify the high and low of the trading
channel and manage your trades accordingly.
6. After identifying a trading channel or range and you
see a trading opportunity, set your entry level at the base
of the channel if you are going long or at the top of the
channel if you are going short.
Don't chase after price once it breaks out of the channel
(although many who engage in Forex day trading do so). You
will not get the optimal entry point. Waiting for price
to take you in either at the top or bottom of the channel
means you can have a smaller stop and your price target
7. Pay particular attention to the previous day's high
and low. Price will often hesitate and retrace at these
levels. If you are a Forex day trading scalper, you can
often grab a nice pull back of 10 pips or more at these
Note: Although there are various ways to calculate the
previous 24 hour period depending on where you live, using
GMT as a standard is often beneficial. Midnight GMT is a
time when the market is generally very quiet and unlikely
to make new highs or lows.
Succeed Or Fail?
It is unlikely you will succeed at Forex day trading if
you fail to understand or take into consideration support
and resistance. This indicator is that crucial! Yes there
may be fancy indicators out there with all the bells and
whistles, but this simple indicator, marking where price
reached a high or low during previous trading sessions,
can be one of the most powerful and effective Forex day
trading tools available.
Be sure you spend sufficient time studying it, examining
your charts, marking off the key levels each time you begin
a new Forex day trading session.
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