Using Barriers to Spawn Successful Trades

To learn the ways in which traders can determine areas where many barriers are can be very profitable for traders. Various kinds of cost barriers are in the Currency trading market. It is common for pairs of currency to reverse direction at these barriers. By learning how to combine them, traders can develop a plan of trading with higher probabilities of success. A few barriers include support and resistance levels, psychological barriers, and Fibonacci levels. Barriers on trend lines and at pivot points can also strengthen our analysis. Lets look at the different kinds of barriers common in the FX market.

Support and Resistance Levels

Support and resistance levels are major turning points that the market has consistently respected in the past. The more times the market has used them, the stronger they are. Support is seen as the turning point where buyers took control and the currency pair began to rise. Resistance is any part at which the market finished going up and dropped down. Support and resistance levels on larger time charts are considered better than those on little time charts.

Psychological Barriers

Psychological barriers are looked at as major numbers. A numeral with the last numbers of 50 or 00 is a significant barrier. A number ending with 000 is better. You will be flabbergasted at how often a currency pair starts do die and changes direction within a few pips of a psychological barrier.

Fibonacci Levels

Fibonacci lines are used often to determine if a point has the potential to reverse. Begin with larger time charts and make Fibonacci lines on big moves. Go down and mark all smaller moves. Try to find where the Fibonacci lines, psychological barriers and support and resistance lines agree with one another.

Trend Lines

Make trend lines to put a mark on all major moves and then go and mark the trends that arent quite as big. If you ever run into trend lines that go in the same direction, mark them. To mark them, put lines following the bottoms of an upward trend and along the highest points of a downward trend.

Pivot Points

Most packages for charting have either a calculator or a tool that draws your pivot points. These are areas at which the currency pair is likely to turn. Many tools and calculators give you many numbers both below and above the present levels of the currencies you follow.

Making lines to mark the different barriers that we regularly see in the FX market can aid us in identifying where a pair is likely to turn. Take note of those levels where multiple barriers correspond. This strengthens the chance of making trades that will make us money. If you have many barriers that connect at a certain point, then it is very significant

To find out more about these barriers and their application on your charts, visit our website and www.lotsofpips.com.

Jared Passey has worked with hundreds of forex traders around the globe, has created several high-probability strategies, trades his own portfolio AND manages a forex fund. He enjoys helping other traders and holds a free weekly online forex trading club. (Use of this article requires above link to remain).