Support and Resistance Trading Strategy.
Assistance and Reluctance A popular trading method based on the horizontal levels of support and resistance is the forex trading strategy. The highs and lows of the candlesticks establish these levels. Following a period of consolidation, a break-through of these levels indicates the start of a trend. All you need to use this method is the ability to draw lines—at least imaginary ones—and no chart indicators.

  • Well-defined low stop-loss.
  • Relatively high success rate.
  • Unclear target levels.
How to Trade?
  1. Support level is formed by the lows of two or more candlestick bars that form a rather straight horizontal line with no lower lows between them.
  2. Resistance level is formed by the highs of two or more candlestick bars that form a rather straight horizontal line with no higher highs between them.
  3. Consolidation is a period without any trend, forming near support or resistance level, with the relatively small candlestick bodies.
  4. A close below the support level signals a short position.
  5. A close above the resistance level signals a long position.
  6. Stop-loss is set to the low of the previous candlestick (for the long positions) or to the high of the previous candlestick (for the short positions).
  7. Take-profit can be set relatively to the stop-loss or as a trailing stop of some sort.

Support set-up :

Resistance set-up :

A period of consolidation is clearly seen on both example charts. In both cases the support/resistance level is formed by two candles on a rather short period. Stop-loss is placed close to the entry level. Take-profit couldn't be clearly set at the position entry moment, but a risk/reward ratio of not less than 1:2 could be used easily.

Use this strategy at your own risk. SONY Net Business can't be responsible for any losses associated with using any strategy presented on the site. It's not recommended to use this strategy on the real account without testing it on demo first.