The question of creating or choosing an effective trading strategy is very important for the trader. There are different types of TS. Which one to use – decide the trader, taking into account the purpose and personal preferences. Different market analysis methods and tools are used in trading systems. But many of them are built to trade by levels. And they actually proved their effectiveness. Tracking price behavior near important levels allows traders to enter the market at the optimal time and close the trade at a profit. But there is one difficulty. In such trade, it is very important to correctly anticipate further market developments. That’s what’s going to happen: trying or bouncing off a level . In this article, I want to give some recommendations. Their use will help you understand what can happen in the market further: bounce from an important level, or the price continues to break it.
Narrow price range
If the price starts to move in a narrow range for a long time, it is likely to break through it. The split signal can be considered strong if the range of each subsequent candle decreases. At the same time, the upward movement with at least each candle becomes higher, and on the downward movement – the maximum decreases.
Consolidation price
on the currency pair price chart shows consolidation near an important level. Very often this situation ends in a level split. If consolidation occurs immediately after the level is broken down, it may also indicate that the movement will continue towards the division.
Premature slaughter
Sometimes you can see such a photo. The price did not approach the level and turned. This means that the break-up occurred in advance. In this case, it is important to observe further market developments. If extreme renewal does not occur, this may be an error confirmation. This means that it is possible to open a suitable trading position. Example:
For upward movement, the price did not reach the resistance level and reversed. In the future, further local highs were below the maximum inverting candle. This means that a continuation of upward movement is unlikely. That’s what happened in my example. The market has seen the trend change from above to further. And finally give me some tips. If the breakout candle has a very long shadow (the top is on the upward movement, the bottom is on the downward movement), this means that the split may be false. If the price range starts to fall immediately after the explosion, it is unlikely that the movement towards the failure will continue. What it will be: trying and bouncing off the level depends on many factors. But the trader can reduce the number of erroneous trading decisions. Inga Fedorova 06.03.2021 Trial Record and Bounce from the level first appeared Forex Trading Magazine | forex-for-you.ru.