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You can create your own buy or sell signals by determining short term trend line, support levels and resistance levels. This article is about short term trading. We enter market using trending method. Support and resistance level will be our guidance to enter and exit from market.

Support and Resistance

There are two ways in determining support and resistance level. The first one is by numerical calculation (using yesterday High, Low and Close value), and second one is by marking at the chart directly.

In this section, we?re going to discuss about the second one. We?ll have support and resistance levels by marking at the chart directly.

Let?s see their definition first:

Support:

When price finds more and more buyers and they think that it?s oversold so they starting buying it up and that causes price to back up away from support.

Resistance:

When price finds more and more sellers and they think that it?s overbought/overvalued so they starting selling it up or taking profit and that causes price to back down away from resistance.

And there is one rule to obey:
“When resistance level is broken, then technically it will become support level. And vice versa, when support level is broken, then technically it will become resistance level.” (RULE #1)

Short-Term Trend

After determining support and resistance levels, then the next step is to determine short term trend. This is so important since we are going to make our signals based on trend line.

Draw lines that connect lowest opening/closing price (not the lowest price) to create bullish and bearish trend.

When Do We Buy or Sell?!

Ok, now the most important question is ?When do we buy/sell??

Let?s now remember RULE #2 that we must obey in implementing trending method:
?We only buy in bullish trend and we only sell in bearish trend? (RULE #2).

And:
?Sell near/at resistance levels and buy near/at support levels? (RULE #3).

?Do not sell too far below bearish trend line and do not buy too far above bullish trend line? (RULE #4).

?In bearish trend, when market price crosses above trend line, then it?s time to wait and see and expect the new trend. In bullish trend, when market price crosses below trend line, then it?s time to wait and see and expect the new trend? (RULE #5).

Practice this technical analysis regularly until you really get the concept. Then you may use it in your live trades.

Good luck.

Richie is a forex trader and forex technical analyst.

You may read my articles at:
Forex Library

and my daily technical analysis at my brother’s blog:
Brian Signal

Written By : Ramano Richie