Price quotation support and resistance levels
Category : Strategy
For successful trading a trader needs to have the full range of tools to analyze and predict future asset movements. All of these instruments together form the trader’s trade strategy. It’s a set of basic rules and techniques for determining entry and exit points of the transaction and determining the direction of the trend.
If a trading system displays the probability of moving, the fix api trader needs to know when to enter the movement and how long to stay in it. The answer to these questions are levels of support and resistance.
I personally use this in my trade, and today I want to share the way I use it myself.
Let’s start by defining the values for each level:
- The level of support is a specific area on a chart where quotations of a financial asset have repeatedly reached its values and have unfolded (or “played”). Often, all purchase orders are located in this zone, as well as levels of revenue capture from current salespeople. Thus, when quotes reach the zone, buyers begin to actively purchase assets and sellers close short positions. Then there’s a price flip.
- The resistance level is a similar area on the graph, with the difference that the elevation is a mirror reflection of the first definition. If the quotations show growth and get closer to resistance zone, this indicates a possible price flip. Deferred vendor orders and exit rates from buyers are there already.
As you can see, these levels are easy to track and see on the graph. Exactly at these points you need to either enter positions or limit open positions.
I would like also to point out an interesting fact:
Levels of support and resistance can often change their display. This is typical for the fix apiforex market. When quotations hit the support/resistance level, it automatically equates the level hit to the inverse level. For example: quotations of EUR/USD currency pair hit the level of support and prices were established at that level. Thus, this level of support will serve as a resistance zone for current quotes. And vice versa. When the quotations hit the level of the resistance and are anchored over it, that elevation will already become the support for current price values.
How do I use levels of support and resistance in my trade
The key element of my strategy is to define the current wave cycle and follow only trend waves. If I figure out that the current descending value of the quotes is going to be in the third pulse wave, I will only open sales transactions between levels. To do this, I use the Fibonacci grid (http://www.investopedia.com/video/play/fibonacci-grids-are-key-your-trading-strategy/), which displays the mathematical levels of support and resistance for a particular wave. The filter is a hit of the Bollinger Bands channel. Thus, if the Fibonacci corrective levels coincide with historical zones with support or resistance, then I will enter the transaction with a pending order precisely from that value.
Levels of support and resistance are an excellent tool for determining the best entry point into the market. If you apply this element to your fix api trading, you can get a comprehensive, ready-to-use trade strategy that will be based on only a few levels. The trader will understand the definition of the exit area and the nearest target. Of course, such a tool is easier to automate and turn into a trading robot than, say, fix api arbitrage trading(http://www.forexzzz.com/product/forex-zzz-lock-arbitrage/), but it will require regular interventions by the manager to determine the level correctness.