Understanding and proper locating of support and resistance levels are absolutely necessary in order to make money in forex trading. Support and resistance levels, especially when used with other interpretations of the price action, are far superior to the degree of effectiveness than the lagging indicators, if you know how to use them.
The problem is that many beginners do not use these figures properly. Here are some tips to help fix this problem.
Do not draw support and resistance levels to confirm your trading idea. You may have read over the weekend that the EURUSD will decline. Such an assumption is expressed not for the first time and it is highlighted in many sources, so you are sure that you want to enter in a short trade with EURUSD.
The problem is that many newcomers are opening their graphics and are looking for the support and resistance levels, which correspond to their trade idea. This is completely wrong. Why?
Because these levels are nothing more than a combination of two price points. In fact, you can do these levels on any chart, and confirm this way almost any potential deal. But the support and resistance levels are not true if they fail to comply with the rest of the market. And the only way to find them is to notice real and very obvious levels.
Do not trick with your support and resistance lines. Novice traders tend to draw level with the candle body or its wick, or mixing both. They do this because they are afraid to miss the deal.
The support and resistance levels exist in order to provide you the market model, to show its dynamics, to identify all the ups and downs. And the right way to trade is to wait for until prices reach the realistic and obvious support and resistance levels.
Do not deceive yourself just because you're afraid to miss a deal in the writing of these levels. You should take precedence over this emotion by taking active steps only on the basis of obvious levels.