Support & Resistance - Alan Oliver
Hello Everyone,This week we look at the USDJPY chart to see a very simple, basic technique that can make a fortune in the markets if followed and understood by the trader.
This week we look at the USDJPY chart to see a very simple, basic technique that can make a fortune in the markets if followed and understood by the trader.
The principle of finding support and resistance levels between past tops and bottoms is very valid and worth the time to study and master. We have looked at the Fibonacci levels in the past, but another very important level, popularized by W.D.Gann, is the 50% or half way level.
Gann said a trader could make a fortune just using this one technique alone, and it has been my experience to see many major reversals occur at this half way point or what??™s commonly called the balance beam.
On the hourly chart, we can see a major low marked A at 113.98 and a major high marked B at 116.74. Once the up trend has been broken, as displayed by crossing the blue trendline, we can now use the Fibonacci tool to reveal price areas of support and resistance that may produce a trade sometime in the future.
At point C on the chart, around 115.30, we are at the 50% or half way point between point A and point B. Here we can see some consolidation before the market reverses and moves higher, travelling up to the Fibonacci 23.6% level. Here, the advance is halted and the selling reverts back to retest the 50% level as marked point C.
Once again, the 50% level provides support and another rally drives prices higher.
Where each trader enters a trade and exits is of course a personal risk decision, but in both cases there were very good profits on offer if we maintain a close watch on the 50% level and act in terms of our trading plan and money management rules.
Best wishes for next week,
Alan Oliver.
Alan Oliver is a full time trader and educator, author of the best selling book ???Trading with the Gods???. He is on record as predicting and trading the September 11 2001 market crash and explains the trade fully in his book. His website www.tradingwithgods.com contains more information on the book and his trading manual Trading DNA is considered one of the best of its kind in unravelling the mystery of Fibonacci and Gann. The manual is very easy to follow and understand with many graphics and examples, and is fully supported with weekly articles and reviews and direct contact with the author
www.metatradertools.com