Using intraday levels in Forex trading
In the news about the situation in the Forex market you can always see publications about the support and resistance levels. Usually it is not said how they were calculated, though sometimes it is indicated that they are some minimum or maximums, channel boundaries, Fibonacci levels. There are levels that are important and not very important. It unites all levels with one property – in this place the price stopped and went in the other direction. Why is there a turnaround going on? If you understand it, you can independently define important levels and use them in Forex trading.
Opera and bids
So-called “bids and offers” play a big role in price formation in the market. As they are executed, the price changes. Simply put, these are pending buy and sell orders. In the places where these orders congregate, there are levels. For example, the euro exchange rate is growing and has approached the level of 1.2000, but here a large number of sell orders have worked, and the price began to fall.
With the help of charts in the MetaTrader trading terminal you can define important levels yourself. To do this, you need to set up the hourly charts of the forex market so that you can see the price changes over the past two or three days. In addition, it is necessary to determine the opening and closing times of the day by GMT on the chart. To do this, you can draw vertical lines according to the deviation of your terminal or use special indicators. Thus, we will identify the important levels that worked out the day before yesterday and may have an impact on today’s price. That is, pending orders may remain in the same places.
Maximums and minima
Horizontal lines on the chart show the openings, maximums and minimums of days, intraday reversals. They’re probably important for stopping the price. But that’s not exactly true. As a result of finding all the points, there are a lot of lines, but there are unnecessary ones that need to be removed. It often happens that some economic news or an official’s speech unfolds the price. And if the price turned on the event, there were no orders at these levels, and we delete them.
The next stage of finding important levels is easier. We need to use the Fibonacci grid. The default settings for this tool do not have a 76.4 level, but it is very important. This is a mirror reflection of level 23.6. Therefore, we enter the properties of the indicator and add this level. Then we find the maximum and minimum of our working period (2-4 days) and stretch the grid at these points. Where it will be 0% or 100%, it does not matter in this case. Then we are looking for a coincidence of the fibon levels and the lines that were drawn earlier. You can move the top and bottom points of the grid a little bit, especially if there were long candle tails. After we have seen the maximum number of matches, we stop and delete those lines that did not coincide with anything. However, we do not touch the highs and lows of the days, closing/opening levels and round levels of type 1.2000, 1.2100, 1.2150.
As a result of this work, only the most important levels remain on the chart. Now they can be used for intraday trading. There are many different tactics. The simplest example is to start trading from the opening of European markets to the breakthrough of the nearest level. There is a very high probability that the price will go up to the next level. Stop right behind the punched level. When approaching the next level, we close the order and observe what will happen – a breakthrough or a rebound. And then we act on the circumstances. This style of trading is called scalping and it is the most profitable.
Of course, it is possible to capture a part of the American session, but in any case, at the end of the day it is necessary to close all the positions and do the work to find the levels again. It’s easier now, because it’s enough to take into account only the changes of the last day. And be sure to train on a demo account before you start real trading.