Determine Support and Resistance Levels -
They are Your Target and Your Backstop

Knowing major support and resistance (s/R) levels is an essential part of your trading plan. Not only do they represent typical profit targets, but they can also serve as a "backstop" to your position, providing extra insurance against loss.

Technical trading is a Forex trading method many traders use and it is based entirely upon price charts and their indicators. Fibonacci or Gann retracements and projections, crossing averages, channels and oscillators rule these traders. The Fibonacci targets are the most commonly followed support and resistance levels. They will be often quoted as target levels for prices.

The other price levels that are important in Forex trading are the major price levels... 1.3000, 1.3100, 1.3200, etc. These levels plus the halfway points between these levels... 1.3050, 1.3150, 1.3250, etc. are typical support and resistance levels for prices. These prices will often be associated with options and are often heavily defended by very large players.

Trend lines are also important indicators of support and resistance. Lines drawn on daily charts between peaks or valleys of the price charts can also indicate strong S/R zones. Trend lines are probably one of the simplest yet most under used indicators we have available.

Combinations of two or more indicators at the same level deserve extra attention

If you are unsure about calculating S/R levels, most of the major brokerage websites, such as Daily Fx offer a daily summary of the S/R levels for the major currency pairs. Using their figures will at least give you a fighting chance at picking the most important levels to watch.

When planning your trades, you should try to ensure there is enough room for your trade to grow in the direction you plan, before it will encounter a major S/R level. This will help protect your trade against price reversals before your target is met.

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