Trading Support And Resistance Levels
Different Timeframes calls for Different levels
In every time frame from monthly to one minute has its own unique resistance and support levels. If you go in large time frames all other levels from smaller time frames will be covered in large candlesticks and unnoticeable. So if you are trading the support levels just bear in mind that levels of larger time frames are major in terms of significance and changing the current trend.
Just like any other strategy it cant be precise, this is due to the simple fact that support and resistance levels are not always mere line as some might want to suggest but there are zones. In simple fact many a times price will move towards a support level line and before it touches it it then shoots up because it was already in the zone. Golden rule never be focused on one price level.
Must be obvious
Never be suspicious about it nonmatter which time you are at support and resistance levels must be clearly outlined. If you cant easily notice it then its not there. They always stick out and stand out, if you start guessing about it then ask yourself is it really obvious if not let it pass.
Trend turning points
There is always a demand and supply changes when price approaches a resistance or a support level. When a price goes to a support level then you should expect an uptrend sooner or later, same applies if the price is rising towards a resistance level that zone might be turning point of the uptrend to a down trend.
Good risk reward ratios
If you are to do a market back test look at the major support and resistance level and see for yourself when the price changed trend at precise zones how long did they travelled in pips if you are calculate. The risk to reward ratio will be insane because you can risk only 20 pips and the market is likely to move up to 200 pips just to be average a ratio of 1:10.