Support and Resistance Trading Strategy

Support and Resistance Forex trading strategy — is a widely used trading system based on the horizontal levels of support and resistance. These levels are formed by the candlesticks' highs and lows. A break-through of these levels after a period of consolidation gives a signal for a trend. This strategy doesn't require any chart indicators except for the ability to draw lines (at least imaginary).

Features

• Well-defined low stop-loss.
• Relatively high success rate.
• Unclear target levels.

How to Trade?

1. Support level is formed by the lows of two or more candlestick bars that form a rather straight horizontal line with no lower lows between them.
2. Resistance level is formed by the highs of two or more candlestick bars that form a rather straight horizontal line with no higher highs between them.
3. Consolidation is a period without any trend, forming near support or resistance level, with the relatively small candlestick bodies.
4. A close below the support level signals a short position.
5. A close above the resistance level signals a long position.
6. Stop-loss is set to the low of the previous candlestick (for the long positions) or to the high of the previous candlestick (for the short positions).
7. Take-profit can be set relatively to the stop-loss or as a trailing stop of some sort.

Example

Support set-up:

Resistance set-up:

A period of consolidation is clearly seen on both example charts. In both cases the support/resistance level is formed by two candles on a rather short period. Stop-loss is placed close to the entry level. Take-profit couldn't be clearly set at the position entry moment, but a risk/reward ratio of not less than 1:2 could be used easily. If you are having trouble detecting support and resistance levels on the chart you can use our free MT4/MT5 indicators for that: Support and Resistance or TzPivots.

Warning!

Use this strategy at your own risk. EarnForex.com can't be responsible for any losses associated with using any strategy presented on the site. It's not recommended to use this strategy on the real account without testing it on demo first.

Important News Trading Strategy

Important Forex News trading strategy — developed specifically to trade Forex news with as little risk as possible. It can be used only for important Forex news releases such as U.S. GDP, non-farm payrolls and interest rate decisions. Although all currency pairs react on such news, the USD-based currency pairs show the best result.

Features

• Trades will have fundamental background.
• Not very hard to set up.
• High success rate.
• Important news events are quite rare.
• High volatility and spread widening during important news releases.

How to Trade?

1. Choose an important news release that has an effect on the Forex pairs.
2. For EUR/USD I recommend: U.S. GDP, U.S. nonfarm payrolls, U.S. interest rate decisions, Eurozone interest rate decisions and U.S. budget deficit reports.
3. Enter both Long and Short positions approximately 30 minutes before the releases (to protect yourself from slippage and ungodly spreads).
4. Stop-loss for the Long position should be set around the 1-2 hour local minimum.
5. Stop-loss for the Song position should be set around the 1-2 hour local maximum.
6. Take-profit for both positions should be set at least to twice the level of stop-loss. I'd recommend even setting it to 3 * SL.
7. Don't forget to cancel the untriggered orders after the news went out.

Example

The example chart depicts EUR/USD M15 behavior during the interest rate decision announcement by the FOMC on September 23rd, 2009. Both stop-loss levels are clearly visible in this situation. The conservative take-profit levels are easily hit. Only Long position triggers a TP, while the Short one is closed by SL.

It's possible to trade such news with the pending orders for more potential profit (setting entry points at the same levels as the stop-loss levels are set for the opposite position). But it's more risky.

Warning!

Use this strategy at your own risk. EarnForex.com can't be responsible for any losses associated with using any strategy presented on the site. It's not recommended to use this strategy on the real account without testing it on demo first.