Trading Opportunities at Recently Created Levels of Support and Resistance

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Contents

Support & Resistance: Trading The Retest

Understanding Support & Resistance

Learning to understand and effectively use support and resistance was a major turning point in my own trading. It is essential when trading that you find something that make sense to you, that you understand and believe in and that you are able to build a solid trading plan around. Support and resistance levels can at first seem quite difficult to engage as the levels may seem tricky to identify and this is why it is crucial that you firstly learn to properly identify support and resistance levels in the market and begin to understand how price reacts around them so that you are able to then move on to trading them.

If you aren’t already familiar with support and resistance levels then check out this brief video and for a more in-depth look check out this webinar recording.

The most basic way that we look to use support and resistance levels is to fade them, whereby we look to buy into support and sell into resistance. This type of strategy can work well initially with clearly defined levels as price moves into them for the first few times. However, as we build our Forex knowledge and start to learn more about how the market works we can start to take advantage of further dynamics at play around these important levels.

Understanding Order Flow

As we know, the reason that support and resistance levels exist is due to the underlying order flow in the market. A build up of buy orders creates support and a build up of sell orders creates resistance. Each subsequent time these levels are tested, the order at the level are eroded as more participants enter the market. Eventually, upon enough probing these orders giver way and the supply/demand balance shifts.

For example, as a surge in buying creates a support area, we see price bounce as buy orders are filled. If price then returns to that area we see further reactions higher as those buy orders not filled first time around are filled along with fresh buying. Subsequent returns to the level may similarly be met with further buying but eventually as all original buy orders are filled and fresh buying dries up to due to the lack of momentum we see a shift in the supply/demand scale and supply outweighs demand to take price lower.

Trading The Retest

The typical guidelines espoused for trading support and resistance suggest that the more times a specifics level or area is tested the stronger it becomes. Whilst it is true that levels displaying many tests are indeed strong, the idea that these levels become stronger with each touch is actually the opposite of what is happening due to the order flow dynamic we just discussed. An understanding of this dynamic paves the way for new trading opportunities in the market.

As broken support indicates the dominance of supply over demand in the market we need to adapt our view. The area that was once support, created by strong demand, now becomes resistance, created by supply. Where we previously might have looked to buy at that area, anticipating a reaction higher we can now look to sell, anticipating that as price returns to that level sell-orders previously unfilled will be filled along with potentially fresh selling interest.

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Trading the retest of key levels in the market can be an extremely simple yet powerfully effective trading strategy. The beauty of the idea is that due to the underlying order flow creating the setup, you can really trade this on all time-frames as the same dynamic plays our over and over again on different scales. Even within the large example we are looking at I can clearly identify setups that would have been fantastic lower time-frame trading opportunities.

Lets zoom in further on the rectangular area highlighted in the chart above.

Can you see how exactly the same setup occurs on the lower time-frame? The very order flow dynamic that we were looking at in our larger 4hour chart setup is seen here working in precisely the same way on the 1hour charts.

Creating A Trading Plan

Once you have a raw trading idea in place such as we have here, you then need to think about really firming the idea up and shaping a solid trading plan that you can construct rules for, allowing you to consistently engage the market based on your plan.

Things to think about:

Will you simply trade a retest of the level or will you look for further confirmation such as identifying key price action signals? Alternatively, will you look to combine an indicator to act as a filter for your trades?

If you are looking to build indicators in to you system, Order Flow Trader can be a fantastic tool to use in these scenarios whereby you look to enter on an Order Flow Trader signal given as price reacts to the level retest.

Furthermore, you must consider your stop loss placement. Will you use structural levels such as recent key highs or lows, or will you use an ATR based stop considering the volatility of the instrument in your placement. If you use ATR based stops you should definitely check out our ATR Boundaries indicator which is an incredibly effective upgrade of the classic ATR indicator and can be really helpful in stop placement.

Finally you need to consider your targets. Will you run a simple risk:reward based system where you look to target x times your initial risk or will you consider market structure, targeting the next key level?

In considering your targets, one final point to note is that in terms of taking the very best setups and really looking to give yourself as good a shot as possible at placing a winning trade you should always be looking to trade with the trend and infact this simple setup can be a really effective way of gaining entry to trending markets. Simply establish the dominant trend on the higher time-frames and then drop down down onto the lower time-frames seeking to identify the retest of key broken support and resistance levels to give you entry in line with the dominant trend. This will give more weight to your trade and you may find that momentum affords you bigger winners, allowing you to trail stops rather than playing for a specific target.

All comments, charts and analysis on this website are purely provided to demonstrate our own personal thoughts and views of the market and should in no way be treated as recommendations or advice. Please do not trade based solely on any information provided within this site, always do your own analysis.

What Is Dynamic Support and Resistance In The Forex Market?

Verified Profitable Trader

  • What is Dynamic Support and Resistance?
  • How I can find Dynamic Support and Resistance in the forex market?
  • What is the Ichimoku Cloud?

In my last article, I talked about how forex traders can find the best key support and resistance levels. This is a critical component to understanding price action trading . But what is less talked about, yet critical for your trading is understanding and finding Dynamic Support and Resistance .

In this article, I’m going to help you understand what is the difference between ‘static‘ and ‘dynamic‘ support and resistance. From here I’m going to talk about why you need to understand dynamic support and resistance , along with give you two methods for identifying and trading dynamic support and resistance.

What is the difference between static and dynamic support and resistance?

When we talked about key support and resistance levels in our last article, you should have noticed a pattern. You should have noticed all those levels were ‘horizontal‘. While many key support and resistance levels are horizontal, many of them are ‘evolving‘, which means they are ‘dynamic‘. Dynamic support and resistance levels, or areas, where the market can pull back into and find support w/o needing to be at a horizontal support or resistance level.

This happens because:

1) The market is evolving, and sometimes buying/selling interest changes in a way that isn’t at pre-designed levels

2) Momentum in trends is dynamic, along with the order flow

Momentum can often be the underlying energy behind trends or movements (kind of like running downhill).

There are other reasons, but the key point is that you get the underlying idea, and can integrate this ‘conceptual knowledge‘ into your trading. We’ll get to this later in the article.

But to summarize:

a) Static support or resistance levels aren’t moving, and are horizontal in nature

b) Dynamic support or resistance levels are moving, and are not horizontal in nature

Now that we know what dynamic support and resistance is, we can move onto the next section.

How I can find dynamic support and resistance in the forex market (or any market for that matter)?

There are many methods to find dynamic s/r, but we’ll talk about two that I prefer to use.

Dynamic Support and Resistance Strategy #1: The 20 EMA

The 20 EMA is one of my favorite choices for discovering dynamic support and resistance as it does a really good job of being ‘balanced‘. What do I mean by being ‘balanced’? So the 20 EMA (exponential moving average) tracks the last closing prices of the candles for the last 20 periods. It gives more weight to the most recent closes (hence why it’s exponential), with less as you go through the series of 20 candles.

Below is a good graphic of how it differs from a ‘simple’ moving average which weighs the data the same regardless of time.

EMA’s (exponential moving averages) are balanced (IMO) because it does a great job of detecting the more recent momentum and changes in the price action, while at the same time taking into account some of the longer term movements in the price action, so well placed in between those two forces (hence ‘balanced’).

Below is a 1hr chart on the EURUSD showing the 20 EMA and how the price action related to it.

Notice how the price action touched the 20 EMA several times (navy line) which could have offered you great trade setups to get into the market with trend?

Another example is below on the S&P 500 on the 4hr chart.

In this chart of the S&P 500, you can see how the 20 EMA offered some great trade setups both with trend, and counter-trend as the market reversed.

It’s important to note the 20 EMA can act as a solid method for finding dynamic support and resistance on any time frame.

Dynamic Support and Resistance Method #2: The Ichimoku Cloud

In the first 3 years of my trading, I spent the majority of my time learning, studying and trading two strategies:

#1 price action

#2 the ichimoku cloud

If you want to learn about how I trade price action, click here to watch

However for now I’d like to talk about the ichimoku cloud (called ‘ichimoku kinko hyo’) roughly translates from japanese to ‘ one glance balanced chart ‘. It was created by Goichi Hosada many decades ago. It is one of the most commonly used methods for analysis and trading strategies in Japan, and there are many great ichimoku traders who were considered some of the best analysts of their time (i.e. Hidenobu Sasaki).

To briefly sum up the ichimoku cloud, the goal of this approch is to communicate in one shot (or ‘glance’) the following:

1) what is the trend in the market

2) what is the underlying momentum (or lack thereof)

3) what are future key support and resistance levels

You read that last part right (“future”). One of the primary goals of the ichimoku cloud is to give you an idea where future support and resistance levels will be (and how much there is).

I’m not going to do a whole lesson on the ichimoku cloud. If you want to learn more about the ichimoku cloud and how it’s constructed, click here.

But for our purposes, just understand that the ichimoku cloud measures a) momentum < a form of dynamic support or resistance >, and b) future support and resistance levels.

Below is a chart to show you how this works.

In the above S&P 500 ichimoku cloud chart on the 4hr time frame. There are several ways the ichimoku kinko hyo can act as ‘dynamic’ support or resistance. But for our purposes, in this uptrend, notice how the Tenkan Line (green line) did a good job acting as support on minor pullbacks.

The tenkan line does this well because it’s meant to track the underlying momentum in the price action. If the trend is strong, and has good momentum, the tenkan can often act as support or resistance. If momentum is weak, you’ll see this in the tenkan line by price crossing it more frequently, and not respecting it. This should tell you momentum is ‘weak’ or ‘weakening’ (depending upon the ichimoku context).

You’ll also notice the kijun line (red line) which is supposed to track the underlying trend in the price action . Notice how as price pulled back deeper in the uptrend, it stopped at the kijun several times, offering potential trade setups to get in this with trend.

There are many ways ichimoku is great for helping you find ‘dynamic’ support or resistance, but these are two good methods for now.

NOTE: If you want to learn more about the ichimoku cloud, click here for several free videos on learning more about the ichimoku cloud.

In Summary

While we spent a good amount of time recently talking about horizontal key support and resistance levels, today we’ve showed you how there is a different form of support and resistance which expresses itself as ‘dynamic‘.

We’ve also given you methods for finding dynamic support and resistance , along with showing you how the ichimoku cloud can provide an alternative (and useful) trading method.

Now one thing I forgot to ask is, have you ever looked at a chart and had a hard time finding key support and resistance levels?

Usually when I look at the price action on a chart, and I find it’s pulling back to areas where there doesn’t appear to be any support or resistance, I often try to see if the market is respecting ‘dynamic’ levels vs horizontal ones. Often times when I do this, the chart becomes more clear as this change in perspective gives me new trading opportunities I was missing before.

If you’d like to learn more about the ichimoku cloud, don’t forget to check out my ichimoku trading course. And if you want to learn more about forex dynamic support and resistance, take a look at my price action course.

Now Your Turn

Have you had this experience of not being able to find key dynamic or static support and resistance levels, or why the market pulled back to where it did? What did you learn about forex dynamic support and resistance levels from this article?

Make sure to leave your comments below, along with ask any questions you have on the subject. And don’t forget to tweet/like this article on your favorite social media so others can benefit from it.

Until then, I’ll look forward to hearing from you.

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Verified Profitable Trader

Hi, I’m Chris Capre, founder of 2ndSkiesForex. I’m a verified profitable trader and trading mentor. As a professional trader, I specialize in trading Price Action and the Ichimoku cloud. As a trading mentor, I have one goal: to change the way you think, trade and perform using 18 years of trading experience and cutting edge neuroscience to wire your brain for successful trading. Want to improve your trading edge and mindset? Check out my trading courses here.

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Trading Opportunities at Recently Created Levels of Support and Resistance

Follow AUDUSD Following AUDUSD Unfollow AUDUSD

AUDUSD Forex Chart

Ideas

As we forecast uptrend for this day, so Forecast City suggests buy (limit) above S1=0.6045. But the short term forecast is range bound, so we expect to reach the following targets: TP3: R1=0.6115. TP4: R2=0.616. Set the stoploss of these orders at breakout of S2=0.6035. Stop and reverse: If trend gets reversed, sell (stop) orders will be opened at breakout of.

Thanks for Taking Interested in my Trading Idea. AUDUSD: Long Trade Setup with pattern Dear followers, the best Gift for me is “will be your likes , comments & Share Note: This is only for Educational purposes; this is not investment advice. Thanks for your support!

Well, the chart is clear enough to know what’s happening: but here are my reasons: As you can see a trend has broken and the possible barriers are visible in grey regions On the other hand, there is another TrendLine (In pink) from days ago, which might be a resistance too, and the whole chart is below my chosen EMAs. What is your opinion? Comment it below. If you.

It’s also possible the AUDUSD can Rally and make a new Weekly High before the Drop

Overall, AUD/USD is trending downwards. Recently, AUD/USD moved higher after the Reserve Bank of Australia held interest rate unchanged at 0.25%. No new easing measure was announced. Currently, AUD/USD is moving towards the resistance level of 0.61800 and the next support level is at 0.59000.

Hello my fellow traders, hope you all are making some profits. We are here with our new analysis so that we can increase those profits for you. Let’s get into the analysis. As we can see that the pair gave a Breakout from its Descending Channel Breakout then it did a retest and started going upwards. As per our analysis, one can go long till the resistance. Let.

Supply & Demand zone on the 60M TM. I advise to set the SL just above the previous high and NOT the exact zone. This is a 1:3 risk-reward ratio. From now on I will post all my trading idea’s on this platform and traders can use my idea’s for their own trading orders.

Hi traders, here is the analysis of AUDUSD In previous analysis i talked about two scenarios for audusd, check it out will leave the link below. If am expecting week DXY, this pair will be a good candidate to sell some dollar as its ready to break out, I will look to buy if provide me with entry reason Hey,�� Support this idea push the like button, share and.

��Good afternoon, guys!�� ��Today is a great day to get some profits!�� or no. ��hahah Let’s take a look at the hourly chart of the Australian dollar.���� ��A promising setup . �� ��Due to the very active growth, the price at the moment will probably go sideways between 0.61573 and 0.61940, and then active growth will again be possible.������ ��Will growth be active? ����.

AUDUSD 4 h chart analysis: purple rose channel internal operation, a potential ABCD model waiting for validation, of course, must break the red trend line pressure is likely to open up the space. So, trade plan: 1. Waiting for a breakthrough at the top of the trend line after buying red, a target near D or purple passage near the trend line. 2. If, out of a.

Market Commentary: First have an look for the positional trend i shared here previous. if you are a follower of me. and sometimes i will share the counter trend trade also in 15 mins and 1hr. but that is risky ones. so if the trend is bearish or bullish, if i am expecting the correction. book the profit there and wait the correction to end and.

flag pattern can grows price! resistance range 0.6230 TP 0.6400 – 0.6640 SL 0.6060 forexness

Australian dollar, can be seen to be moving into a larger falling wedge. Nice buy.

1hr Chart, We could see the last candle is moving across the trendline. If we see this candle close above the trendline, it is a buying opportunity. 4hr Chart, The same as 1hr chart. 1D Chart, Yesterday the candle closed higher than its open. Possible the reversal candlestick and it also reject the 38.2 Fibonacci level. It could be around 100 – 300 pips count

Hello Traders! Please support this idea with a LIKE if you find it useful. AUD/USD followed the S/L 3 (support line 3) I think, the price hit the resistance line A (or B). – This post does not provide financial advice. It is for educational purposes only.

Reason For Entry – Double top candle pattern – Bounce/retest of strong 4H resistance – 618 Fib Reason For Sl – Above strong 4H resistance level – Above previous swing high – Above double top candle pattern Reason For TP – Targetting lows – Targetting hight of double top

Best area to enter with less risk, after prices retest last broken strcuture

In the 4 Hour time frame, price was previously on an uptrend(shown by the Higher Highs and Lower Highs), forming a rising wedge. Price broke the lower trend line and moved lower. Price then reversed to the daily zone 1. What to anticipate. Whether price will break through the previous Higher High (0.62037) and close above it/higher (which means the uptrend will.

Technicals

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AUD USD (Australian Dollar / US Dollar)

The Australian Dollar and the US Dollar pair belong the Majors, a group of the most popular traded pairs in the world. This pair’s popularity soared because traders were attracted to the interest rate differential of the pair. This has waned in recent years due to economic volatility worldwide.

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