Category: Free Forex Course
Support and Resistance
Support and resistance are normally discussed within the context of supply and demand. Supply and demand is the fundamental principle of economics. The law of supply and demand is pretty easy to grasp. If demand increases relative to supply, price will rise. Conversely, if demand decreases relative to supply, price will fall. When supply and demand are balanced, price will remain sideways.
I am surprised that many traders do not understand this basic powerful concept. I honestly feel that it would be almost impossible to trade consistently profitable without a fundamental understanding of support and resistance. I personally view support and resistance as my GPS. It helps me to navigate through the chaos.
What is Support?
Technically, support is synonymous with an established low. When prices fall to an absolute minimum, demand causes price to rise. Remember the law of supply and demand? As more traders “demand” the currency pair, prices rise. This concept can be easily elucidated when viewing the price wave model.
Using the price wave analysis method, we know that an uptrend has higher highs and higher lows. Conversely, we know that a downtrend has lower highs and lower lows. Every low that is established is called support. The terms support and low are often used interchangeably. I like to imagine support as a floor. It sits beneath price. For practice, pull up any chart. Analyze the lows of any uptrend and downtrend. This exercise will help you to train your eyes to identify support.
What is Resistance?
Technically, resistance is synonymous with an established high. When prices rise to an absolute maximum, lack of demand causes prices to fall. Remember the law of supply and demand? As more traders “sell supply”, prices fall because of lack of demand. This concept can be easily elucidated when viewing the price wave model.
Using the price wave analysis method, we know that an uptrend has higher highs and higher lows. Conversely, we know that a downtrend has lower highs and lower lows. Every high that is established is resistance. The terms resistance and high are often used interchangeably. I like to imagine resistance as a ceiling. It sits above price. For practice, pull up any chart. Analyze the highs of any uptrend and downtrend. This exercise will help you to train your eyes to identify resistance.
Identifying Support and Resistance in Forex Trading
By now, we know that support is tantamount to an established low, and that resistance is tantamount to an established high. But for trading, this is not good enough. Highs and lows get breached all the time. In trading we look for a failure off of a previous high or low to establish “true resistance or support.” Double tops and bottoms are classic resistance and support defining patterns.
If you apply the price wave analysis method on one chart long enough, you will notice how the highs and lows of one price wave may converge with the highs and lows of another price wave. This is how support and resistance is naturally formed. To gain a better understanding, please watch the video on support and resistance. This concept will make sense visually.
In the first video, we talk about the convergence of price waves that naturally form support and resistance. In the second video, we bring up a price chart to apply the theory into practice.
To the inexperienced trader, the financial markets seem to move randomly. In contrary, a compleat trader can see the order amongst the randomness. Whether or not it is conscious, this is accomplished using Forex Fractals analysis. Fractals are phenomena that occur in nature. They are self- replicating patterns of non-linear objects, such as clouds, river flow, and leaves. Forex Fractals patterns occur on price charts as well, and by using Forex Fractals analysis you will be able to see order amongst the randomness.
Fractals exist on every timeframe, from ticks to yearly data. Low risk, high probability trades frequently occur if Forex Fractals analysis is properly done. For instance, a great shorting opportunity may result when a Fibonacci retracement level is tested and a Fractal forms. Also, a great buying opportunity may occur when resistance is broken and there is a retest of previous highs. These resistance areas were fractals too. Also, you may be looking to buy after a fractal forms on new support. Remember, resistance turns to support. These patterns frequently occur, and it is to your advantage to learn its significance.
How We Use and Define Forex Fractals
We use fractals to define highs and lows. Forex Fractals consist of a series of five minimum bars. Bill Williams advises beginning traders to imagine your hand as a fractal. Your middle finger is the defining structure of a Forex Fractal. You have two fingers to the left and two fingers to the right. If you place your palm outward, this is an up fractal. Your two fingers to the left of your middle finger have lower highs relative to your middle finger. Conversely, your two fingers to the right of your middle finger have two lower highs relative to your middle finger. This is what an up Forex Fractals looks like on a price chart. Two lower highs on both side of the fractal. Video 1 clearly elucidates this structure.
On the contrary, if you place your palm inward and point to the floor, this is a down fractal. Again, your middle finger is the defining structure of the Forex Fractals. You have two fingers to the left and two fingers to the right. Your two fingers to the left of your middle finger have higher lows relative to your middle finger. Conversely, your two fingers to the right of your middle finger have two higher lows relative to your middle finger. This is what a down fractal looks like on a price chart. Two higher lows on both side of the Forex Fractals. Video 1 clearly elucidates this structure as well.
In video 2, we go through a price chart to apply the theory to practice. You will see how everything blends together. Forex Fractals are the defining structure of highs and lows. The highs and lows are the defining structure of price waves. Support and resistance naturally occur after a convergence of the fractals. Everything is connected. It is like a work of art.
Fibonacci Retracement Introduction
In my opinion, I believe that Fibonacci Retracement is the most incorrectly used method on the market. Maybe I should rephrase that. I believe that most Fibonacci methods are over-simplified. They are not used to its full potential. I have read lots of books on the subject, and only three people were able to “wow” me and still today I find these guys to be true innovators and pioneers of the Fibonacci Retracement method. After acquiring my knowledge, I have found ways to enhance the reliability of Fibonacci Retracement. I hope I can do the same for others as these great teachers have done for me.
Fibonacci Retracement is the foundation of my trading approach. It is no secret. After training my eyes and my brain to understand what the market was telling me, trading has become less stressful and more empowering. I can finally say that I have an edge in the markets since applying Fibonacci Retracement.
The Fibonacci sequence and the golden ratio are manifested throughout nature. It is even used in music, art and architecture. The general consensus is our brains are wired to the vibrations of these numbers as well. And since a price chart is just a mathematical representation of the change in fear and greed, which is directly related, to change in price, the change in price must be a direct reflection of our human emotions. So, if our brains are tuned into the vibrations of this mathematical phenomenon, the change in price can be measured with the same vibrations. These vibrations are better known as the golden ratio. Isn’t that amazing?
Fibonacci Retracement Rules
In the first lecture of the Fibonacci Retracement series (Fibonacci Retracement Introduction) we discuss elementary concepts. First we touch upon a little history lesson and common occurrences in nature. Afterwards, we derive the golden ratio from the sequence.
In the second lecture of the Fibonacci Retracement series(Fibonacci Retracement Rules) we discuss the derivation of the other popular Fibonacci levels. These levels are the 38.2% and the 50% retracement levels.
Fibonacci Retracement Explained
In the last part of the Fibonacci Retracement series (Fibonacci Retracement Explained) we go through a couple charts for practice. I quickly discuss a trade I made recently in gold. Afterwards, we just look at a few more examples on how the retracements tie into the price wave model. Hopefully after this exercise, you will be able to see how everything fits together.
This series is not intended to be an advanced strategy. This is common knowledge amongst all traders. However, it is important to understand these basic concepts. Once we get into the advanced concepts of Fibonacci Retracement, your head might spin. So we must crawl before we walk and learn the basics.
Price Wave Analysis
Welcome to the price wave analysis lecture. This lecture on price wave analysis will help you develop fundamental concepts of technical analysis that are cardinal for your overall development. If you are just starting to learn about price wave analysis, or if you already know the basics, this series will get you going in the right direction. Plus, I will urge you to watch this video if you plan to enroll in our advanced forex trading course.
Price wave analysis is easily applied after it is correctly understood. The main tenet behind price wave analysis is that prices never rise or fall in a straight line. Prices fluctuate up and down in a series of zigzags. It is the main reason why new traders become discouraged. If they are buying they see price falling, or if they are selling, they price rising. So they panic and close their trades. Imagine if this happens to millions of traders through out the world. The fear and greed is manifested in the price wave model. It is amazing how this model works. Although some critics say that the knowledge of the model makes it self-fulfilling, that just makes the model better. It becomes more apparent once you understand price wave structure.
Although rudimentary in its appearance, price wave analysis is the foundation of technical analysis. It is mainly used to discern between bullish, bearish, and choppy trends. Instead of buying because prices are going higher, or selling because prices are going lower, we use the price wave model to objectively mitigate our margin of error. Using price wave analysis is the framework of every strategy imaginable. It all starts here.
In the first lecture, we will break down the price wave model. You will learn about the impulse wave and corrective wave. You will also learn how to determine which trend is current. You will learn about how to recognize reversals and continuations. Also, you will learn how to avoid the mistake of prematurely assuming a resumption or reversal of a trend. These are very basic principles of price wave analysis.
In part 2, we will analyze a real chart and apply the theory to practice. You will see how professional traders determine if the sentiment is bullish, bearish, or neither. Also, we go over how to practice on your own. We recommend free charting software that analyzes the price wave model for you. All you have to do
Free Forex Course will get you started and give you a better understanding of the fundamentals of currency trading. Our educational material will introduce you to the markets and give you the most useful information in the simplest manner possible. With this fundamental knowledge you’ll be more prepared to face the markets. Some more advanced educational videos will provide invaluable information on Forex Trading for people new to Forex Trading as well as “veterans” of trading. Get the Jump Start in Forex Trading with the Free Videos, Enjoy…