Understanding and identifying support and resistance levels properly is absolutely critical to making money in the foreign exchange. Support and resistance (especially when used with other price action interpretations) beats lagging indicators every single time - if you know how to use them. The problem is that many beginners don't apply them properly. So here are some hints to help remedy that problem.
1. Don't draw support and resistance to confirm your trade idea
Perhaps you have read over the weekend that the EUR/USD will fall. This isn't the first time you have heard this, and you have heard it from many sources, so you are confident that you want to short the EUR/USD.
The problem is that many beginners will open their charts and search for S&R levels that match their trade idea. That is absolutely wrong. Why?
Because S&R levels can be nothing more than the joining of two price points. In fact, you can draw these levels all over the chart and "confirm" almost any trade with them.
The problem is that these are not true S&R levels unless the rest of the market will honor them. And the only way to find these levels that the market honors is for them to be completely obvious. Get Internet #1 - Forex Help Eur Usd and be Successful forever!
2. Don't cheat on your support and resistance lines
I heard a great explanation of this while talking to another experienced trader the other day. He says that newbie traders tend to draw S&R levels using the bodies of the candles, some with the end of the wicks, some mixing them up. They do this because they are afraid of missing a trade.
You see, support and resistance levels are there to provide a template to the market - something that you can lay over the market's movements and make sense of all its ups and downs. But the proper way to trade is to wait for price to hit the obvious support and resistance levels before trading.
Don't cheat when drawing these levels just because you are afraid of missing a trade. You must get over that emotion. Make sure that you only trade the obvious support and resistance levels
Forex Help Eur Usd - How to Use Forex Support and Resistance Properly
