Trading support and resistance (5/7/07) GBP +60pips

December 6th, 2007 expert Posted in FOREX TRADING EXIT STRATEGIES |

Online Forex Trading Concepts:- Multiple timespans,  support and resistance, stop placement, exiting strategy, channel trading.

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In online Forex trading it is important to always review all time spans of all the currencies traded to establish the long term dominant trend as well as important support and resistance levels. Looking at the GBP monthly chart gave us some idea of which short term trading strategies to employ. The GBP was clearly in a upward trend for a number of years. It is however at a 15 year previous high at 2.0110 . Any previous high is a psychological barrier because one of the definitions of a upward trending market is when the price is making new highs and new lows. When it comes to a 15 year new high this is even of more importance.

There are a number of ways the market can react to this new high. The bears can try to put up a very strong fight to try to keep the price below the previous high or what often happens is that the breakout is a high volatility breakout with the price moving upwards very quickly.

From the price action after the 15 year high violation it looks like we are in for a fight with the Bears putting up strong resistance. Sometimes it is a good time to not trade on a technical basis because of this fight.

Yesterday a double resistance opportunity presented itself for a possible trade. A support trendline that been violated (and now becomes resistance at 2.0185) and the upper resistance horizontal area (at 2.0195) formed a double resistance area for a downward trade. This was a risky trade because it was against the trend but often when there is a breakout the price goes back to retest the previous resistance. This is what happened and our sell activated at 2.0180 and the price went down to retest the previous support at 2.0110. The stop was put above the previous high.

www.Expert-4x.com is a sponsor of this free educational blog and uses many of the concepts high lighted in these postings for its daily alert services.

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