In this episode of Truth About FX, Walter digs into catching the correct support and resistance lines — or is there really one? According to Walter, it really depends on what your goal is and your biases. What is the most important thing to keep in mind when “tracking” your support and resistance? Does the timeframe matter? He also touches the line chart and how important it is to your trading.

Download (Duration: 05:56 / 6.80MB)

In This Episode:

00:33 – correct basis

02:19 – quietest period

03:32 – exceptional

05:11 – remove the noise

Tweetables:

Just go to the line chart. [Click To Tweet].

Use a higher timeframe.  [Click To Tweet].

Where is spike going to go?  [Click To Tweet].

Announcer: Sometimes, forex trading is a wild and wooly place to be. That’s why Hugh is here, to post your questions to Walter, the naked forex guy. Hugh’s got questions and Walter’s got the answers. Here at the Truth About FX Podcast.

Hugh: Hi, Walter. This trader is asking, “My biggest trading problem is finding the correct support and resistance lines.” So, how would you recommend they find the correct basis to put lines?

Walter: Well, it’s like trendlines. There are no correct unless you of course have asked Tom to mark. All jokes aside, here’s the thing, it depends on what you’re using on them for, to be honest, but I’ll get away from that. I don’t want to muddle the waters.

Let’s say that you look at the candle charts and you just say, “Woah! I don’t know what to do here. This is crazy. How do I find these lines?” So, what I would recommend is you just go to the line chart.

The line chart is essentially a one period moving average on the close. It’s connecting the dots of the closes, so that’s what the line chart does. If you do that, what that means is you’re support and resistance lines are going to be based on the close of the candles and not the wicks.

As some people would argue that with me and they would say, “Oh no, Walter. You’ve got to count the wicks because that’s how far price actually went.” Well, I like the idea of close.

I like the idea of, at the end of the day, what was basically settled on? For me, I like close. Everyone try to crack at Asia, took it where they could. London, took it where they could and then valley. New York, try their hand in there just kind of settles down and then gets there, depending on when your candles close on the daily chart. Either there’s the interbank period and then the market closes, or it’s like there’s the market closes and then there’s the interbank period. It depends on when you have 5 pm New York close or midnight GMT close but, doesn’t really matter.

The point is everyone has a go at it and it’s kind of settle around that interbank period when there’s an interbank trading going on which is the quietest period of the day for most days and that where one sells a lot.

So, I’m okay with close. I use closes in my systems and I understand why people think it’s crazy because close on a New York Stock Exchange stock is much… There’s something more behind it. Whereas,