Understanding Support and Resistance Indicators

Understanding some basic forex support and resistance indicators can be a good way of establishing a trader in the study major support and resistance levels.

So many traders out there are void of indicators that can give them information on support and resistance points. This article is poised to reveal and make you understand some of these basic tips. I’ll be sharing with you here some of forex best support and resistance indicators that I have tested to be the best.

1) Fibonacci Indicator – This is a powerful tool that traders around the world employ to help them forecast where the market could retrace to and head back to its original trend.

What we get in a Fibonacci indicator is retracement and extension, with vital support and resistance levels at 0.382, 0.500 and 0.618. The markets in a funny way pay attention to these levels. The currency market moves in waves of retracement and extension, you can apply these levels in a bid to aid you trade in the direction of the trend. Fibonacci is a vital tool that aids traders forecast the likely extension and invariably aid traders position their exit.

2) Forex Pivot Point – The Pivot Point is an easy technical tool that’s mostly used by the heavy weights, thus offering a reliable resistance and support level. If you tryout the pivot point on your activity chart, you’ll be surprised how the market moves after breaching them.

I prefer plotting a daily pivot point on my activity chart, although you can as well use a hourly pivot or a weekly pivot based on your trading preference. You can join me as employ pivot points as exit and entry targets.

3) Bollinger Bands Indicator – Asides the above listed indicators, investors are also poised on using the upper and lower bands of the Bollinger band as support and resistance levels. What this means is that at any time you find such price alignment, it is necessary to closely monitor them as the market respects them.

We have investors around the globe who practically trade price retraction on these bands. The Bollinger Bands are better used in a ranging market. During a ranging market, we get to see price fluctuate/oscillate up and down. At times in which price hits the upper band, it is advised that you enter a SHORT/SELL to make gains from the retracement. At the same time, a BUY is advised when price touches the lower bands.

The above mentioned indicators are good for determining support and resistance levels and I advised that traders use them in determining their entry and exits on positions as well. Due to high volatility and risk involved in trading forex, it is advised that you try out these indicators on a practice account before coming live on a real account. You can get along by spending more time on a practice account, this would definitely help you fine tune your trading plan. Ultimately, you should never invest more than what you afford to lose in the financial markets.