Trading Strategies based on Support and Resistance are widely used in Forex Trading.
First lets get the basics down
Generally speaking Support and Resistance is a straightforward concept:
The market moves up and then pulls back, the highest point reached before it pulled back is the resistance.
As the market continues up again, the lowest point reached before it started going back up is the support.
Its vice-versa for a downtrend.
Simple right... so why do we need Navin to teach us more about this???
If you notice at 6:55 mark in the webinar, not everyone has the same idea of what the support and resistance levels are. Its not as simple and "straightforward" as we think it is.
Most of us work on the theory of drawing our support and resistance lines to make it look visually appealing. It can be easy to do so looking at the past and they look great, one area connects to the next and it looks like "the design is working" but is that really the case?
Does it always work like that?...
In the webinar we dig deeper into this concept. The focus point of Navin in this webinar is to have you guys think of WHY should a support and resistance work? And most importantly, when would it not work?
Why will the level hold or not hold?
For you car lovers, Navin uses two car analogies in his explanations (12:01 in video), a $50k Mercedes and a $100k Ford (must be a Mustang...)
Lets look at the Ford analogy which is based on you being the seller.
You own the Ford. You have a chance to sell for $90k near he beginning of both scenarios but you don't... I mean it was worth $100k before right!
But in the space of 2 days it drops to $60k.... God Damn! Then it slowly rises again, up to $65k, $70k, $80k and drops back to $70k...
Then we see the difference between the scenarios.
In scenario A it shoots back up to $90k in 2 days. Awesome! But do you sell? You had the chance to sell before at $90k and you didn't.
What about scenario B, it takes a week to creep back up to $90k from $70k. Do we sell now?
In scenario A, it's important to note that the speed it shot back up to $90k is similar to the speed it initially dropped to $60k. Support and Resistance may not be as powerful with the sharp spike and so you might be hopeful that the price could get back up to $100k.
But scenario B is a sell when it reaches $90k again. Because it went up so slowly it suggests that prices are struggling to continue to go up which is a better indicator of true support and resistance. The memory of the previous drop to $60k still looms so its time to get out of there.
Navin shows actual chart examples of this theory in the Webinar starting at 32 mins.
Webinar Key Takeaways
Hope this article is helpful and you enjoy the webinar, its full of funny comments and it's educational and entertaining at the same time. Let me know how you liked it in the comments section below.
If you want to continue to grow your Price Action knowledge sign up below for more helpful articles and webinars.
If you want to accelerate your Price Action education check out our Mastering Price Action course.
With Pip Love,
By submitting I consent to my data being collected via this form and agree to the Terms and Privacy of Urban Forex