By Daniel Shaw – When trading according to the levels of support and resistance the most important thing for every trader is to find a certain criteria of the breakthrough of these levels as a signal to enter the market. The target of the Forex trader is to find the best moment to enter the market, and trading strategy of support and resistance levels gives perfect opportunities to catch a good trend. Forex market is very chaotic and unpredictable. Its complex system is influenced by many factors of the outside world and causes its movements.
It is very easy to find the support and resistance levels by using the Japanese candlestick charts upon making the technical analysis of the market. Let’s see what is hidden behind a candlestick chart that shows a potential breakthrough of the support or resistance level. The most patient traders who are already in the market and keep the open positions will leave their positions open in this risky moment anticipating of the end of the market’s correction. The more emotional traders will see the opportunity to enter the market on the opposite side, trying to catch the top of the market’s trend. The rest will remain as observers, not entering the game and their opinions on the further direction of the price will be different.
At this stage, the behavior of prices stays uncertain, since the opinions of the traders in the market are divided. In addition to that there are still a lot of other participants who are currently out of the market and they are not in a hurry to enter it. It is hard to predict the price at that moment as it may take any direction. This is the moment when the traders must put their emotions aside and be more patient waiting when the trend will start clearing up.
Every trader has his own minimal measure of minimum uncertainty that is needed to enter the market. This criteria is directly related toot he psychology of the person. Since every trader has his own criteria and levels of risk, so they will enter the market at a certain price level at different time. When the bulk of traders make their decision and open the trading position in a certain direction, the market will become the most certain. In the charts it will be presented by a strong trend in a certain direction accompanied by some price corrections.
There are many external factors that decide the market’s direction. The most important one is a fundamental factor based on the analysis of the macroeconomic indicators and events as well as the technical conditions laid down in the past movements. When all these factors contribute to the price movement in the same direction, an experienced trader has an ability to recognize a potential trend before it starts.
Therefore, if you do not have much experience to predict a good trend with the high level of probability, we recommend you make a detailed analyses of the price movements in the past along with technical and fundamental analyses that will give you much more certainty than watching the screen waiting for the breakthrough of the resistance or support levels.
About the Author
Daniel Shaw is a Forex Trading professional. Visit his site Singapore FX to get more useful information and tips on how to tradeForex in Singapore.
