How To Use Support & Resistance Levels To Earn Profits

Support and resistance levels are a part of Forex trading that must be understood thoroughly. It is widely used and reflects real world decisions at what happens on these levels.

This is the simplest form of support and resistance. When the market moves up and gets pushed back at a certain level it is known as resistance. If the market is dropping and the price pushes up significantly then that level is considered a support level.

Although these levels occur in the market you will often see these levels be broken or tested. When these levels are broken the price smashes through these levels. Whereas, when they are being tested you will see price creep up on the levels and using candlestick analysis you could identify potential turning points.

Support and resistance levels in different time frames hold different strength.

What we mean by this is a daily support or resistance level will be much stronger than a 1 minute level. This is because volatility has less impact on higher time frames and these are also the levels where commercial and non-commercial institutions set buying and selling orders.

As a Forex trader you can set multiple support a resistance levels:

  • 4 Hourly

  • Daily

  • Weekly

  • Monthly

These levels in these time frames will have significant impact on charts, if you look for anything below these time frames support and resistance levels can become easily broken and the theory itself can lose value.

Practice drawing these levels using back testing, go back 10 years worth of candlesticks and start drawing out what you think are good and bad levels of support and resistance to see how well different levels work.

The logicStrategy takes into account major forms of technical analysis, fundamental analysis and quantitative analysis. Using the scores provided by the system with support and resistance levels can become a profitable strategy alone.

To keep up to date with education, analysis and research head to our info centre.

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