Trading the forex market successfully requires the extreme level of technical skills and clear understanding of the different parameters of the financial instrument. Those who are trading the financial industry for a long period of time have been following strict trading discipline. There are many traders in this financial world who often ask, “Is there any holy grail in the forex market”. To be honest the answer is yes. Proper money management is the only Holy Grail that forex traders can have in their trading career. So how do the professional traders make a consistent profit out of trading the financial instrument? The answer lies within their smooth execution of the trading plan and discipline. Most of the professional traders who are making consistent profit in this market are using the simple support and resistance level to take high probability trades in the market. It’s true that some advance professional also uses different candle stick formation at the key support and resistance level to take quality trades in the market. You might be wondering is it really true that they are making money only by using this technique. The answer to this question is also yes. Many novice traders in the forex industry fail to remain consistently profitable because they use too many indicators in their char to take their trade. But using too many indicators just ruins the technical analysis part of the traders. In the eyes of trained professional, a properly drawn support/resistance level along with candle stick confirmation signal is enough to make you a profitable trader in the financial world.
What is candle stick?
There are three types of the chart in the forex market. The first one is line chart and the rest are bar chart, candle stick chart. Now a day’s candle stick chart is very much popular among the professional and new trades since it allows them to understand the market sentiment precisely. The candle stick is formed based on the price movement of a certain period of time. Traders can use different time frame candle stick to trade different financial instrument in the forex market. But experts suggest that higher time frame candle stick pattern like the daily or 4 hour chart candle stick tends to provide much more accurate trading setups. Each candle represents the price movement of a certain period of time and allows the trader to identify the dominating powers (Bulls /Bears) in the market.
What is Support and resistance level ?
These are the most important level in the forex market. A support is such a place where the price move upward after hitting that level. Support level is the in which the currency pair find new buyers in the market which ultimately drives the price up. In terms of technical analysis, it’s such a place where the price has respected a certain level for a long period of time in the longer time frame. Similarly, a resistance is such a level where the price tends to fall after hitting a critical resistance zone in the market. To be precise in support level price find new buyers in the market and in resistance level the sellers take control of the market. Professional traders always take their trade entry in the key support and resistance level.
What is Candlestick pattern?
Candle stick pattern is one of the most advanced and easiest ways that trades uses to trade different financial instrument in the market at the key support and resistance level. There are mainly two types of candlestick pattern. The bearish candle stick pattern and the bullish candlestick pattern. When the price hits a critical support zone in the market traders know that the market is most likely to find new buys at this stage so they for bullish candle stick pattern at the support level. Once they find a bullish candle stick pattern they execute their buy order in the market. Similarly when the price hits a critical resistance level in the market professional traders wait for bearish candle stick formation at the key resistance level to execute their sell order in the market. This type trading using the candlestick pattern at the key support and resistance level is often considered as price action trading.
Importance of support/Resistance level in trading
Support and resistance level is considered to be the most important level in the forex market. Since the long term bearish move in any currency pair can pull its end after hitting a key support level in the market. Similarly a long-term prevailing bullish trend can comes to an end due to the presence of key resistance level in the market. In other word these are the two potential trading spot where the market reverses it direction of movement. But in order to trade the support and resistance level make sure you know how to draw the support and resistance level properly. A valid support/Resistance level will have at least two lows or high connection with a single horizontal line. The more the connecting points the better the significance of that support and resistance level.
Summary: If you want to become a professional trader then you must know how to draw the support and resistance level in forex market. Once you master the art of drawing the support and resistance level in the market go through different candle stick patterns available in price action trading strategy. Memories the highly reliable candle pattern often referred as price action confirmation candle stick pattern and wait for the price to hit any critical support or resistance level. Once it hits any of them use the price action confirmation signal to execute your live trading order in the market.