Many elements could turn out to be support and resistance ; here is a list with a couple of examples:. The Forex trader has a clear level which they mark for themselves as crucial. This is called a breakout trade and price then has enough momentum to break through that zone. In our trading room, we are on the lookout for breakout trade setups strikes and the first pullback after breakout boomerang in the Forex market.
A bounce scenario could mean that price is either making a small retracement, big retracement or reversal. In the case of a small retracement, the price might still break through the support and resistance a little way later. A bounce trade can be entered via various methods. A trader attempts to trade directly at the expected support or resistance zone. A trader waits for a confirmation of price to stop at the expected support or resistance zone.
One of the differences, I think, is the usage of fractals. Another way to trade the bounce trade is by using fractals. Here is how the process would be:. Basically, by letting price stop, reverse, stop, and reverse, the Forex trader now has 2 lines in the sand. The other is on the opposite side. A break above or below either of these 2 levels then constitutes the likely winner.
There is an uptrend on the 4-hour chart. Price moves down 40 pips away from it and forms a fractal on top of price on the 4-hour chart. Price then bounces back up again with the trend but fails to breakout above the resistance fractal.
At this point, there are 2 fractals. A break above the fractal constitutes a break-out. Via this method, it is translated a bounce trade into a breakout. The Forex trader can also use the BPC method as well: The Fractal Indicator helps identify clear levels, check out the article with more information on the Fractal here. Also, depending on the time frame, it is a good idea to go a few pips above or below a fractal It is important to realize that the odds of success are greatest when trading the bounce either: This is a Forex concept or method, not a Forex system, which means there are no particular statistics.
It would be the same as asking how successful are break-outs or trading with the trend? The sample size is huge and depends on too many variables. The idea could be a building block though for a detail trading strategy read more here about creating Forex strategies. This Forex concept is a discretionary method of trading and must be used along with other tools and analysis, specifically multiple time frame analysis.
Do you like bounce trading in forex? Or do you prefer break-outs? How to you trade bounces? Let us know down below, thanks! Many elements could turn out to be support and resistance ; here is a list with a couple of examples: Why is this important? Bounce Using Fractals Another way to trade the bounce trade is by using fractals.
Here is how the process would be: The following two tabs change content below. Winners Edge Trading was founded in and is working to create the most current and useful Forex information and training available on the internet. Latest posts by admin see all. Now Take your trading to the next level by taking our trading quiz to pinpoint your strengths and weaknesses.More...