As I have already mentioned, there are a numerous, even hundreds of ways to trade the markets, I thought it an idea to highlight that there are few simpler and as effective as trading support and resistance breakouts.
Again the one thing you need for this strategy is discipline, and that comes in the form of waiting for the breakouts.
Apart from that this trading using support and resistance lines is ultra-easy to do and mega effective.
Trading using support and resistance lines
Looking at this chart of the USD/JPY you can see that the price opened up on again Sunday evening from its Friday evening close.
The price then moved down quite strongly over Monday 24th after opening… giving us our first resistance level at 11062.3.
From there, the price met support on Tuesday at 10958.7 giving us our first support level.
As the price headed back up to our first resistance level, the candle at 12 noon breaks through this resistance level and as you can see moves higher.
The candle immediately after the breakout candle can give us a good entry point using our 4 hour charts.
You can then place a trade on binary for a set number of hours or if spread betting, open the trade and place a stop loss at the previous resistance line point 11062.3. that has now become our support line.
The price then retracts and moves sideways before resuming its upward climb to the next resistance level at 11229.8.
From this new resistance level we are either expecting a nice strong breakout or a good rebound/swing back down.
Why? Because if we look back at our chart we can get a far clearer idea of where we think the price may go.
As you can now see, the picture is clear.
The price has already rebounded from the same resistance level on 31/03/17 and continued to move down until 17th April where support was met.
Then the price has moved steadily back towards the resistance level that was formed on March 31st.
This simple trade has made around 800 points overall in a month… 400 down and 400 back up if you were spread betting [depending where you entered].
Where do you think the price will go from here? If I was trading this currency pair I’d wait for a breakout candle above the current resistance level around the 11230 mark. I could then place a binary trade for a set number of hours, or I could even use days. If it rebounded we could still trade the swing back down.
Spread Bet or Binary?
I have rarely ever spread bet currencies. I am far more content spread betting stocks or indices… That stems from trading with Vince Stanzione I think.
I do like trading the currency markets on binary though.
Anyway, have a look at some charts and practice drawing in some support and resistance levels. From there try trading the breakouts. You can use a demo account on IG or binary.com to monitor your results.
Drawing support and resistance lines
Don’t over complicate drawing support and resistance lines. All you need to do is ask yourself this… has there been a significant change in the direction of price where I’m about to draw my support and resistance lines?
If yes, then draw your line. It is that simple.
You can also draw support and resistance lines diagonally. This can also help to identify trend directions and create trend channels that can be used for swing trading as well as clarifying entry and exit points.