been holding. If we see the price bouncing again from this level, then we confirm the level as a support. A potential support turns into an actual support, when the price conforms to its level more than once. Prev Article Next Article. The picture below compares two levels a stronger resistance versus a weaker support: Lets take a look again at the EUR/USD Forex pair but this time on a weekly chart. The basic signal which the Momentum gives is with crossing the 100-level line in bearish or bullish direction, giving short or long signals respectively. In this case, if I see the price bouncing up, I go long and play again the resistance game with the stop loss. Note that in my example, the quick drop brought a bearish candle far below the trend, which infers the end of the bulls. Read Three White Soldiers Three Black Crows Forex Trading Strategy.
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If we see the price dropping to a level and then going back up, we consider this area as an eventual point, where next time the market gets to that level, it might find opposition. The right way to do this is to wait for the price to interact with the level first. If buying near support, wait for a consolidation in the support area and then buy when the price breaks above the high of that small consolidation area. We are only interested in trading valid supports and resistances as measured by their authenticity and potential. Wait for a consolidation near the resistance area, then enter a short trade when the price drops below the low of the small consolidation. This example shows how a support could turn into a resistance and how it could start acting as a level with opposite force. Support and resistance areas are the zones where the interests of the market players intersect.
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