Support and resistance are the most important elements of day- trading technical analysis that traders use. They are like two peas in a pod. Traders’ understanding of both support and resistance are crucial.
“Support” is considered the floor for a price, where the buying pressure exceeds the selling pressure and pushes prices upward.
“Resistance” is considered the ceiling for a price, where the selling pressure exceeds the buying pressure and pushes prices downward.
Here I discuss support and resistance with a twist, in reference to a trader’s lifestyle choice. Which will you do?
In my years of trading in the Forex market, I realized that helping a trader dramatically increase success with solid support is most important. Support here is defined as
1. A community of like-minded traders
2. A structured system of teaching new traders
3. An existing system of coaching intermediate/mature traders
Why is support important for a trader? With proper support, a new trader can immediately learn the right techniques from the start and save precious time.
An intermediate trader is also able to check bad habits in his or her trading lifestyle by benchmarking his progress against other successful traders.
A mature trader can utilize the support system to back-test trades and offer experience to new traders.
Building a Support System
To get support, traders need to remember these points.
Mentor. Does the support system provide a mentor? A mentor or a coach helps you get to where you want to go—preferably someone who has considerably more experience than you. A good way to gauge a mentor is by reviewing his personal results over a period of time.
Attitude. Attitude comes from you. A great attitude is needed to get the most out of the trading support system. Your attitude determines your altitude. When you carry a great attitude, you will easily achieve tangible results.
Platform. What platform does the trading support provide? Are new traders able to attend regular classes? Is there online support? With the Internet, some of the best support systems are online, where traders access information in a snap. These support systems also provide a one-stop solution to resolve trading inquiries and a framework of archived trades where traders can check and correct themselves.
On Trading Resistance
Many Forex traders are immediately resistant to one or a few of the following points:
1. Achieving consistency and discipline;
2. Following a structured trading plan;
3. Trading with proper risk- management; and
4. Understanding that “the best strategy” is not the key to success. Money management and trading psychology is.
Check the following points to ascertain if you “trade with resistance.”
Losses. Are you experiencing a string of losses? If you are, it may be time to review your trading plan. Are you sticking to it? Did you follow the rules? Did you allow your emotions to get the better of you? A string of losses demoralizes any trader. As such, check if you have been sticking to your original rules.
Inconsistency. Inconsistency is the bane of most traders. Nothing kills your account more than inconsistent trading. Are you throwing caution to the wind, taking trades on each whim and fancy? Are you playing with 10 lots because you “just feel like it”? Trading with an inconsistent pattern in the Forex market is a losing approach.
Ego. You know what you need to improve, but you don’t do it. You try to prove otherwise instead. Often, your ego is the big obstacle that prevents you from achieving consistent profits in the Forex market.
You feel like you can actually go against the rules and win the trade, because in Forex you can “trade correctly and lose” and “trade wrongly and win.”
But don’t be disillusioned by the latter. Don’t pit your ego against a market that trades US$3 trillion in a day. It will make you pay heavily for it.
Are you trading with support or resistance? Analyze yourself today and you will be surprised at what you might discover.
Print ed: 08/13