That is, if we learn to define the main supports and resistances well, we can achieve great areas of entry, thus facilitating the placement of a reasonable stop loss and the use of a very good risk-return ratio.
Trading with horizontal lines when the market is in trend.
See the image below and notice how these horizontal lines give us good signals:
Prices when they are in a trend, be it high or low, usually go up, down and then climb higher still. Or go down, up and then down even more. These price corrections are known as pullbacks. Which are natural corrections of the market. It is in these pullbacks that we keep our attention to pull the trigger.
In most cases the prices correct to the point of the previous resistance, which has now become a support. The pressure of forex traders in these regions is very strong. And we have a very high probability that prices will return to the previous trend by touching these horizontal lines. The price action is basically formed by the identification of supports and resistance. If a trader does not know the main horizontal lines of the market, he probably will not have much success in forex trading.
To open a position, we will wait for the price action signs. The mere presence of prices in these regions of supports and resistances, still, is not decisive factor to open a position. From now on, we will await refinement signals to buy or sell.
Trading with horizontal lines when the market is lateralized
Basically, trading forex with horizontal lines when the market is lateralized is very simple. The general rule is: buy when prices reach the bottom line and sell when at the top. We will expect prices to get tougher in these regions and we will wait for signs of price action to enter operations. In the image below we can see that prices are in a side market. Therefore, when they touch the upper horizontal line, whose shadow of PIN BAR even touched it exactly, thus informing that the market does not want to be traded at a higher value. PIN BAR, in that case, was a good sign we should have sold in that region.
Price action
Negotiating with horizontal lines in disruptions
To trade forex in breaches, you first need to, of course, identify if there has been a breakdown of a support or resistance. Prices were accumulated, forming a track with no direction at all. This range of trading is characterized by market indecision. And suddenly, a massive candlestick appears and throws the market up or down.
To trade in a situation like this, we will have to wait for prices to correct the horizontal line that has been broken. Thus, we will wait for the PRICE ACTION signs and enter the positions, be it buying or selling. In the image below we can see how a negotiation should be done after the breaking of a negotiation range.
Conclusion
Trading forex through horizontal lines or diagonals is a basic price action technique. In my negotiations, 80% of the Trades I make are based on this technique alone. And I assure you that the level of accuracy is very good. It is important to emphasize that we should also stay connected to the PRICE ACTION signals. They are what will make our tickets more profitable and crystal clear.
