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[Financial Services] How to trade the key levels in the Forex market

How to trade the key levels in the Forex market

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  • Support and resistance levels are the most important trading parameters in the Forex market. Every trader uses the key levels of the market to find the perfect entry point. Though support and resistance level trading seems extremely easy in reality, you will be facing huge problems. However, the experience traders in Singapore know some key techniques which help them to trade with a great level of ease. Let’s learn the proper way to execute trades at the key levels.

     

    What is support and resistance level?

    Support is such a price zone which help the buyers to regain strength. Usually, the price shoots up when it hits a critical support level. On the contrary, a resistance is such a zone which pushes the price down. The active traders try to make a profit by shorting the currency pairs at the key resistance level. So you now have a clear understanding of the support and resistance level. So how do we trade these level? First of all, we have to learn how to find the key level in the market.

     

    Finding the support and resistance level

    Instead of using the smaller time frame, you have to start using the higher time frame to find the key support and resistance level. Try to connect two or more lows of the market to find a key support zone. On the contrary, you need to connect two or more highs to find the major resistance level. If you use the higher highs or lower lows you will get trend line support and resistance level. Once you have your key levels, wait for the price to retrace back to the trading zone.

     

    Some retail traders in the CFD trading industry often use pending orders to trade these level. But this is extremely risky. Instead of using pending orders, try to use the price action confirmation signal to trade these level. The price action trading system is based on the formations of the Japanese candlestick pattern which enables the retail traders to make a huge profit in Forex market. By seeing the high success rate of the price action trading system, it’s very normal to take a huge risk in each trade. But if you fail to manage your risk exposure, you are going to blow your trading account. Managing your risk is the most vital element in currency trading profession.

     

    The use of a daily time frame

    Daily time frame trading is extremely boring but it will always give you quality trades. The novice traders are always busy with lower time frame data but this will never help them to make a profit in the long run. It’s true you will get many trade setup in the lower time frame but most of them will hit potential stop loss level. On the contrary, if you focus on the higher time frame (daily and weekly) you will have less trading opportunity but the quality of the trade will be extremely good. It’s better to wait rather than losing money on poor trade execution.

     

    Risk management factors

    Trading the support and resistance level requires intensive knowledge of risk management. If you take a huge risk, you are not going to make it in the long run. Regardless of the quality of the trade setup, you should never risk more than1% of your account capital. Always be more concern about your investment. Use the demo accounts to find a perfect trading system. Try to maintain a trading journal so that you can easily find your trading mistakes. Always be protective and follow the conservative method of trading. If you want to trade the lower time frame, reduce the risk exposure in every possible way. Use the multiple time frame analysis to filter out the false trade. Be patient and trade the market with confidence. Learn to embrace the losing trades to become a better trader.


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