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Supports and resistances, trading indicators of technical analysis, which have been used at least once in their lives by every even less experienced trader.
There are many among us who work with S/R levels day in and day out and make really big money with them, and then there are a few who can literally work wonders with them and count their losing trades for the year on the fingers of one hand. And that is why today we are going to focus again on one of the trading strategies that use S/R levels.
Strategy entry rules (example)
Entering long positions
- Formation of a 3 candles up-3 candles down the formation
- plotting S/R levels
- hitting S/R levels from above
Entering short positions
- Formation of 3 candles up-mesh-3 candles down
- plotting S/R levels
- hitting S/R levels from below
How to trade with the strategy
Today's strategy is a support-resistance strategy and hence all that is required is to wait for a 3up formation (rising candle), a gap(however wide) and a 3 down formation (falling candle). Then all you need to do is to form S/R levels as can be seen in the picture above/below, then wait until one of them is hit and then enter in exactly the direction as described in the entry rules above.
The above figure shows that the strategy can offer not only plenty of trading opportunities, but also a number of profitable trades, with a percentage success rate in the range of 60-80%.
