Forex Trending, Support Lines, etc

[sam0182]

When you guys (and gals?) draw your support/resistance lines, how much "grey area" around the line do you allow before you consider it broken?

If the price moves just slightly below my support line (.5pips or less), would you consider that breaking support?

Feedback/input appreciated - thanks!

[techno791]

Are you using candles to draw your lines? I've read a blog once and this guy, I forget where it was from, but hey used line charts to draw the lines.
It doesn't touch and retrace the way wicks on a candle does, but I think it has some merit. I don't use that too often though.

Also, for breakouts, maybe look into the 20% rule. If you have a box, take the range of the high and low, 20% of that is you're breakout confirmation. Don't think it goes on rising or falling lines though. I haven't gotten into the whole breakout thing yet anyway. Since the price can only bounce off or break through, you have two options right? My problem always is the fake break outs. There are certain patterns that aren't supposed to have much follow-thru.

[simonyadig]

It's a judgment call. Find a set of guidelines that work well and stick to them. You'll be wrong sometimes but hopefully you'll be right more often and you'll limit your losses regardless. I like to wait for the candle to close the period below the line, sometimes I'll wait for two candles to close below (this depends on what chart time period I'm using).

Selling the instant a trendline is broken is too conservative for most traders. A scalper/daytrader may use that method though.

[sam0182]

Just line charts.

Interesting on that 20% rule, I'll keep that in mind.

Can you recommend any Forex Trending books?

I'm reading lots of general trending books but they're geared towards stocks and often make reference towards volume - something that I cannot apply here in Forex. Any recommendations are appreciated!

And good points on that simon...I need to work on my candles reading. Have been just working with line charts.

[simonyadig]

I recommend switching to candles. Much more information to work with. You don't even have to know any candle patterns right away, just the basic info revealed in a candle is much more info than a line.

[simonyadig]

Sorry the picture is so big. I just linked it and that's the original size.

[techno791]

Sorry, I just have stock trading books too. Refined what I learned for forex. I'll buy some someday....

[sam0182]

Awesome, thanks for the info guys! The candles description is great, I'll work on that Simon.

Thanks!

[wolf825]

Originally Posted by sam0182

When you guys (and gals?) draw your support/resistance lines, how much "grey area" around the line do you allow before you consider it broken?

If the price moves just slightly below my support line (.5pips or less), would you consider that breaking support?

Feedback/input appreciated - thanks!

This will/may depend on the style or method of trading you develop--scalping, or longer moves etc. A trend line can get broken--but what I find that matters is whether the candle closes above or below the line--and on what chart.. a break below a trend or support line on a 1-5 min chart has less influence to me than a candle that CLOSES on say a 15, 30 or 1hr chart. What I find critical is if the candle closes on or below the support moreso than if the move broke the line but then retreated--especially on a longer frame chart. The longer the time frame--the more the support lines tend to reflect significance for how a candle closes...IMO...and for where the more accurate measure of Support and Resistance is...


...and FWIW I usually give it about 5-10 pips of "range". Any further than that, and its broken and needs to be re-assesed OR double checked for where the support was based off from and if it was right/accurate or not...and then look for the next level of support.. IMO... If your next level is only 10 pips away--then its a guess as to where the stronger of the two will be...but if the next level is like 30 or more pips away--you need to look in the past history or on a longer chart a lot more to find which would be more significant for level.

again..IMO....others views will vary--but its whatever works for ya in the end.

-w

[sam0182]

Alrighty, thanks for the info!

And man, those candles are something to get used too...

I was wrong when I said I've been using just line charts - I've been using CLOSE PRICE charting, which seems to give me a little more than just lines. But the candles are a little tricky, especially when I've been trying to bounce off support/resist.