Back in What started speaking about evolving or dynamic support and resistance, both in the Ichimoku Cloud and in using moving averages. These are the most common ones people are aware of; -the horiztonal lines -fibonacci levels -pivot points -trend lines -channels, etc.
For example, once you draw a fibonacci level for a move, those fibonacci levels do not change over time. That is not to say you cannot draw new lines, but the ones you draw will never adjust themselves based on the market. They are what they are. As you can see in this chart, we see many forms of static support and resistance levels, such as the various pivot levels, the forex levels, the fibonaccis, etc.
In fact, you may notice how price respected these levels, resistance at the double top, along with the horiztonal level drawn along the You may even further notice how the This is called becoming a role reversal levelwhere the role of that level reverses from support to resistance or resistance to support. The reason why these work is the big players used their money and a and of it at those key does. And since the market and traders have a memory, if they thought a level was significant before, it goes to reason they will again.
In most cases, these are the most popular between the two and I understand why. Its easier for the mind to think in more static or fixed models. Change requires more flexibility of thought and possibly re-wiring the brain to see things in flux instead fixed lines in the sand. Just draw the lines properly and you have your levels — clean and neat. Price is evolving in real time, breaking out of key support and resistance levels. Often times making new highs or lows where there is no history because price has never been there.
If you only used static models, what would you do then when there is no historical price action? This is where dynamic support and resistance levels come in as they evolve with the market in real time. Due to the hundreds of indicators, I will make a small list here how to draw dynamic support and resistance layers. Some examples are; -Moving Averages exponential, simple, etc. It is their interaction with price that makes them useful to us as traders and creates trading opportunities.
Because they are evolving, dynamic, and interact with price action in consistent ways, this the exact reason they can be used as a type of support and resistance. Anyone who has come to my free weekly price action webinars or seen any of my content will know I use the 20ema exponential moving average and nothing else when trading price action. You can see this on any time frame, from the 3min, to the 1hr to support dailies.
Here are some examples below and then I will discuss what you can read from the 20ema in terms of the market. You can see from the two charts above the various ways price action can and does relate to the 20ema, giving great trading opportunities while representing how dynamic support and resistance works. In a range bound environment, the 20ema will do very little as price is stuck between a floor and a ceiling with already existing support and resistance levels.
So as you can see, the 20ema and communicate a lot to you as a trader offering you valuable information and opportunities to get into the market, especially in trends which is one of the hardest things for traders to take advantage of.
Institutional traders know trends do not go in a straight line and often use the 20ema as an opportunity to get back into the trend at a cheaper price. There are many ways I use the 20ema as dynamic support or resistance, but I will does one major way that what can use in everyday trading.
This I call the Trend-Continuation or Trend-C method. This is where I use the 20ema as an opportunity to get back in the trend when the trend has shown it is most likely to continue. If I have the two variables above in place, then I will look for a Trend-C entry to get back into the trend using the 20ema as my trigger to get back in. This was a trade I recently took and even discussed in my most recent price action webinar.
Notice how in the chart below price had a very stable relationship to it with several touches 8 prior off the 20ema which all resulted mean price continuing higher. Now notice the last bar on the top right of the chart pinbar whereby price had its largest pullback in this upmove, landing right on top of the 20ema.
Using this clear rejection off price with a nice pinbar setup, I waited for a pullback into the pinbar itself, then took a long with the stop just below the 20ema itself. If price rejected off the 20ema before, then obviously buyers came in there to mean back long on the pair. As you can see, this is what price did, going right back to the prior swing high point in the chart below. To recap the methodology, I look for price to establish a relationship to the 20ema, by having a clear direction above or below it.
Once price has developed this relationship to it, I look for a price action trigger, such as a pinbar, outside bar engulfing barpiercing pattern, or just a strong rejection off of it. I will then target support major swing point making sure I have a 2: If I think the market is going to go for a runner beyond my swing point, I can then trail my stop on the other side of the 20ema to give it room to breathe while consistently locking in profits.
In reality, static support and resistance models are only half the picture and sometimes those levels are clearly going to be broken, so placing your orders there expecting price to stop is not always the best idea. This is where learning to read the price action, along with using dynamic support and resistance other half of resistance picture will resistance give you a more complete way to deal with support or resistance.
For further methods on how to use it, make sure to visit my free price action webinars or check forex our online forex courses whereby I teach rule-based methods for trading the forex markets. Intraday Price Action Trading Price Action Trading Explained Forex Trading Insights Mar. I'm Chris CapreFounder of 2ndSkiesForex. I help traders of all levels change the way they think, trade and perform. As a professional trader, I specialize in trading price action.
As a teacher, my passion lies in showing you how to re-wire your brain for successful trading. Want to improve your edge right now? Visit what Price Action Course page. Hey Chris, thanks for sharing your thoughts. Everything you explain and trade is so clear and seems so easy to do, but needs a lot of experience to be finally that simple.
The interesting thing what i found out recently is that i have my difficulties using static SR-Lines. Following the lumosity brain profile my mind has a relative high degree of flexibility, what probable explains it.
What hinders sometimes the personal development is sticking to general boundaries and individual support and resistance lines that are given and accepted as the one reality or rule.
So maybe the trading success will increase the more flexible and reduced to the minimum of requirement in conection to the actual learning process and state of the mind. All things take practice, whether its something as simple as driving a car with forex manual transmission, archery, playing billiards, or trading.
The important thing is to find your stride, things that work for you, where your weaknesses are and work on both. I think it about being disciplined, having persistence, working hard at learning the skill set, strengthening your weaknesses using proper money management, and having the right psychology.
Just let me ask you one question: Why do you do so? First off, my full time job is does and my entire morning is focused on that with very little towards this.
My part time job although it keeps growing is teaching via 2ndSkiesForex. Several reasons; 1 It makes me a better trader having to teach to others as it forces me to really what and understand my stuff to be able to explain and teach it well 2 I really enjoy teaching — helping others become successful is sometimes more joyous than making a big trade.
Imagine the feeling of helping several hundred people become profitable traders through your methods — tis a good feeling and something I hope to continue. Once you have a lot of money, you realize either you can just keep making more and more and more way of the egoor you can take some time to help others.
This is what I do both through teaching and also through my philanthropy work especially in 2nd and 3rd world countries which is very important to me. When I traded EUDJPY yesterday, I have to go up to weekly chart to find previous touch at level back Jan. When they have a good relationship, we have good chance to win trade. Unfortunately they are not always in good relationship.
Let us pray they have more time with a good relationship. Hi Chris, I love this strategy! How would you say I could implement this to binary trading? When you do that, you could then apply this strategy.
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What Is Dynamic Support and Resistance? Below is a forex using several types of support and resistance. Exhibit A As you can see in this chart, we see many forms of static support and resistance levels, such as the various pivot levels, the horizontal levels, the fibonaccis, etc. Various Types and What I Use Everyday Due to the hundreds of indicators, I will make a small list here how to draw dynamic support and resistance layers.
What I Use Everyday Anyone who has come to my free weekly price action webinars or seen any of my content will know I use the 20ema exponential moving average and nothing else when trading price action.
What It Communicates In a range bound environment, the 20ema will do very little as price is stuck between a floor and a ceiling with already existing support and resistance levels.
How I Use It There are many ways I use the 20ema as dynamic support or resistance, but I will share one major way that you can use in everyday trading. An Example This was a trade I recently took and even discussed support my most recent price action webinar. Chris Capre Buddhist, Trader and Philanthropist. Want to Resistance Price And Strategies for Trading Forex? Sign Up for our Monthly Newsletter and Get our FREE E-Book. You Might Also Enjoy. Hello Juan, Thanks for the kind words about the forex trading commentary.
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