Jun 282013
 

Important price levels (Support and Resistance) are displayed in a minimized table that includes the nearest important five price levels above and below present day open. Traders should keep a close eye on how pairs would behave upon trading at these levels.

How we identify important price level?

First, let us define Support and Resistance.
Support: Support for a price is a price area where there are lots of buyers ready to buy the instrument rather than sellers. At that price point, the general perception is that it’s a good buy, and lots of buyers come to buy it. Hence buyers outnumber sellers and there is a higher possibility that prices will bounce back from that point. This is a point where Buying has less risk.
In other words, at support levels demand is thought to be strong enough to prevent the price from declining further. Please understand that Support point is not a place from where it will for sure bounce back, it’s only the higher probability that it will bounce back. Also understand that it’s not exactly a fixed price which should be considered as Support, generally its a range like 98-100 or 560-570.
Which point is Support point: Every Low made by the price can be considered as Support Area.
Resistance: Resistance is just opposite of Support, at this price levels there are more sellers than buyers and with high probability prices reverses from this point. At this point there are enough sellers in the market to prevent it from rising further.
Resistance point is the High made by a price. All the highs will act as some kind of resistance points.
So now you know what is support and resistance price levels really are.
Now, who we choose among different highs and lows to pick our important price levels?
Actually, we are doing this following below two steps,
We calculate the average daily range for each instrument and divide this range into 5 probable price areas.
We look back inside each price area to choose among the many highs and lows had been formed inside price area, via our in-house created price level evaluation system.

How this is can be Useful for My Trades?

On trading resistance and support. You have two scenarios
1. It holds and you can make a trade thinking support or resistance will hold
2. You can trade a break of resistance.
In either scenario timing your entry is crucial. If you think resistance or support will hold WAIT for price momentum to weaken into resistance (support) and act on confirmation. You can do so by using the stochastic momentum indicator for example (This why Stochastic indicator is always attached to market snapshot) watch for the stochastic lines to turn down and cross with bearish divergence and go short. And wait for the opposite on long trades.
On the other hand, if prices go through and break support or resistance only trade if stochastic lines cross and turns up with bullish divergence. This confirms the breakout is strong and likely to continue.
NOTE: By WAITING for the stochastic to confirm price momentum both price strength or weakness and have confirmation that the odds are on your side.

  One Response to “Important Price Levels”

  1.  

    The importance of price level is only known when we get educated about trading and that won’t happen till we are serious about doing it. Mostly people treat it as a part time or free time work but they don’t know it can fetch them serious income. I am lucky that I am able to make enough income from here than what I get from my job so I am focusing a lot on this and with the help of my broker OctaFX, it is even better since their service is just unbelievable so my performance gets even better.

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