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We testing price levels in the Forex
Price levels are one of the most informative tools of technical analysis, it is not surprising that they found application in many strategies. Sorry, to tell you about the principles of work with levels of support and resistance in one review will not succeed, so today I would like to touch on the theoretical basis of the retest of the levels.
First of all, we will understand what is "retest levels in Forex. Probably most readers have heard about Fibonacci, the "pivot" or the Murray levels. In General, no matter what they are called, they are United by one common trait – these levels can be built even on that part of the graph, which has never in history do not overlap.
Accordingly, if the quotes will relate to this milestone, this event will be a precedent, or, if expressed in the language of traders, testing level.
But on the other hand, most of the time the price ranges in the "traded" areas, i.e. such areas where previously were traded. If quoted prices re-approaching the level at which informed market participants have identified an interest, this event is called "we-level", i.e. re-testing.
Retest price level
Practice shows that the predicted levels calculated by the indicators using mathematical formulas, practiced much worse than previously tested. A lot of traders for this reason forecasts on the basis of the retest of the levels that Sami and mark.
What types of "ratestop" there are
Any level at this point in time is either a support or resistance (the third is not given), so that repeated testing can be of two types.
Retest of support levels – the test of strength quotes where buyers have previously shown interest.
We support Forex
Retest of the resistance to repeated attempts to overcome the price, the touch which increases the activity of sellers.
Retesting of the price level
It should be noted that some traders mistakenly assume that strong prior to bidding be sure to connect the big players, they say, they are especially aggressive open long or short, so the price bounces from them.
Of course, in such situations the market come new members, but you can't discount some of the orders which are triggered at the moment of fixing of profit, because to close the deal and record the profit, necessary to carry out the reverse operation.
How does the testing level
Such a seemingly minor factor sometimes becomes the cause of multiple retest levels from which you can benefit.
Touch level as a trading signal
Examining the trade by price levels, authors of many books on trading one error - recommend for transactions to use pending orders. The fact that this approach is very rough, it is still something to use in the study of microorganisms sunglasses instead of a microscope.
In the analysis we levels in the Forex experienced traders take into account the behavior of prices at the time of the touch key of the marker, that is, apply the basic provisions of candlestick analysis. As an example, we cite the following two similar formation, after formation of which events began to develop in different ways.
Examples of retested
If we take into account only the fact of a touch of important quotes, you will notice that in both cases retest the price levels were observed several times. Every new low was formed above the previous one, indicating possible preparations for a breakdown of the specified level.
But note, in the first case, the candle formed a long shadows down, pointing to the weakness of sellers (market participants considered the price reduction as a profitable opportunity to buy a pair), but on the second chart, the situation was the opposite – the price repeatedly crossed the horizontal level, resulting in long shadows, which indicates the unwillingness of market participants to buy the asset.
Similar formations have certain proportions, so their understanding comes only with experience. However, despite the lack of clear rules in the interpretation of the behavior of speculators, there are some regularities, which allows to make more accurate predictions:
The more we observed levels, the lower the probability of breakdown.
Reduced range of fluctuations in the approach to the level (see the last example) the vast majority of cases end with his breakdown.
If High prices on new retest level of resistance below the previous High – probable rebound (similarly interpreted the situation at the touch support, only is taken into account Low).
The true breakdown is recognized, the situation when the body of the next candle is fully punched level (open price and close above the key level).
A false breakout increases the level, that is for another retest his punch will be more difficult.
Training on price levels, profit, trading levels (the real results).
Actually, this topic is much more so in the learning process, each case should be considered separately, unrolling a chart on multiple time frames. I will not hide, this technique is not trivial, but it works in any market and at all times.
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| Category: Forex | Added by: (05.11.2017)
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| Views: 280
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