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Support and Resistance with Stochastic

Support and resistance are two important concepts in forex trading, especially if the market is in a sideways trend. If this is the case, and there are clear marked Support and Resistance levels in the chart, it is possible to use this profitable. In the example picture we see a typical support and resistance chart.



To take advantage from the support and resistance levels, we take the stochastic oscillator to confirm the the possible reverse at the given level. The chart shows clearly at which level the falling price receives support and at which level it will experience resistance. But to find the right entry or exit point, we look on the stochastic oscillator. The falling rate is in the area of support and the stochastic oscillator has reached a value below 10. This means the pair is oversold and we could open a long position. We close the position when the price is approaching the resistance level and and the stochastic oscillator has reached a level above 90. For a short position we will act accordingly reversed.

Since we often see smaller price movements, when the market is moving sideways, we should consider to apply this strategy mainly for currency pairs with a narrow spread to get the best profit out of it.

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