Many traders like to buy dips to support or sell into resistance but this simply ensures they lose.
This FOREX trading tips is all about using leading indicators to confirm a move, rather than simply assuming support and resistance will hold.
Let’s look at it in more detail.
Buying Into Support and Sell Into Resistance.
You hear this tip all the time, but it doesn’t make money.
It is based on the old saying “buy low sell high” which is another phrase that won’t make you money.
If you buy into support or sell into resistance then the logic is that you will have low risk and high reward if the levels hold.
The important word here is “if”
If you trade FOREX then you don’t want to rely on “if” and hope – you want indicators that will increase the odds of these levels holding and your chances of making a profit.
If a price is speeding toward support or resistance then it will break as often as it holds, you therefore need to watch for changes in price momentum and that’s where leading indicators can help.
Getting the odds in your favor
If you want to buy support and sell resistance and get the odds in your favor do use the following FOREX tip.
You can use lagging indicators as well as trend lines in FX trading to denote areas of support and resistance and the ones we like are:
Bollinger bands and moving averages.
These indicaotrs like trend lines should NOT be used to enter trades.
When buying dips to support or into selling resistance, you want confirmation that the levels are going to hold – before prices reach these levels you want confirmation of the turn in advance.
When price momentum turns above support or below resistance you can enter with increased odds of success.
The best timing indicator by far is the stochastic.
Look it up and learn all about it as it’s a great under used tool.
Another great indicator is the Relative strength Index RSI.
Combine the two and watch for confirmation on both and you have a powerful combination you can use to increase your odds of success.
They will give advance warning of a change in price momentum at support and resistance and when they turn in your favor you can enter the trade.
You don’t predict with the above.
You act on confirmation and this will increase the odds dramatically in your favor and increase your overall profitability.
This FOREX tip is obvious, but it’s surprising how many traders simply hope a level holds rather than looking for confirmation
Don’t make the same mistake always act on confirmation when trading FOREX.