Never miss a story from James Stanley

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to James Stanley

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

3 Easy Steps to Trade Forex (Part 2)

By James Stanley

After a trader has learned to identify trend (which we looked at in our previous article available HERE), the next focus that they will generally want to emphasize is in regards to Support and Resistance. Support is a price or a ‘price zone,’ in which buyers have shown, or may show an interest in buying. Resistance is the opposite; a price at which investors have shown, or may show a willingness to sell.

3_easy_steps_part_deux_body_x0000_i1026.png, 3 Easy Steps to Trade Forex

Created with Marketscope/Trading Station 2.0

As you can see in the above picture, when price approached or entered in the ‘Support Zone,’ price had shown a tendency to go up. By price going up, we can assume that there were more buyers than sellers in the market.

Also, as price enters or approaches the Resistance Zone, traders have shown a tendency to sell in the past.

Identifying Support and Resistance in this fashion can be classified as using Price Action to display these levels; as traders are using the price chart itself, devoid of any other indicators or studies to assist.

Support and Resistance can be extremely important for traders to identify as taking a BUY position when price is approaching or in a resistance zone could be potentially costly.

Or, perhaps, imagine taking a SELL position as price is in a Support Zone. If traders respect that support as they had in the past, and ensue with more buying than selling – driving price higher, once again that could be potentially costly.

There are numerous ways of identifying Support and Resistance, or potential Support and Resistance price zones. This is where areas of study such as Fibonacci can come into play, as many traders will look at ‘Fibonacci levels,’ to point out potential prices that may become Support or Resistance in the future. The links below offer more information in specific regards to Fibonacci.

3_easy_steps_part_deux_body_Picture_4.png, 3 Easy Steps to Trade Forex

Created with Marketscope/Trading Station 2.0

Pivot points are another study that traders will commonly look to in an effort of forecasting potential price levels that may function as support or resistance in the future. Pivot points are based on calculations of previous day’s price action. Once again, the links below contain more in-depth information into the study.

If you would like more information Support/Resistance:

Fibonacci Retracements: How to Trade Fibs in Forex

Pivot Points: Floor Trader Pivots

DailyFX PLUS Online Video Course Lesson 1- Support and Resistance

How to Trade with Support and Resistance Part 1

How to Trade with Support and Resistance Part 2

Price Action Swings

--- Written by James Stanley

To contact James Stanley, please email Instructor@DailyFX.Com. You can follow James on Twitter @JStanleyFX.

To join James Stanley’s distribution list, please click here.