Using Barriers to Create Successful Trades

Learning how to identify levels where multiple barriers are can make a trader a good profit. Several types of price barriers are in the Currency trading market. It is common for pairs of currency to reverse direction at these barriers. By learning how to put them together, people who trade are able to create a system of trading with higher probabilities of success. Some barriers have resistances levels, support levels, Fibonacci levels and psychological barriers. Barriers on trend lines and at pivot points can also strengthen our analysis. Now we will look at the different types of barriers common in the Forex market.

Support and Resistance Levels

Resistance and support levels are huge changing points that the market has consistently respected in the past. The more times the market has used them, the stronger they are. Support is identified as the changing point where the buyers took control and the currency pair began to rise. Resistance is any level where the market finished rising and turned down. Resistance and support levels on larger time charts are considered greater than those on little time charts.

Psychological Barriers

Psychological barriers are looked at as huge numbers. Any number with the last numbers of 50 or 00 is a significant barrier. Any numeral with the last numbers of 000 is more significant. You will be flabbergasted at how much a currency pair exhausts itself and changes direction within a few pips of a psychological barrier.

Fibonacci Levels

Fibonacci lines are used often to determine if a point has the potential to reverse. Begin with larger time charts and draw Fibonacci lines on big moves. Drill down and mark all smaller moves. Try to find where the Fibonacci lines, psychological barriers and support and resistance lines agree with one another.

Trend Lines

Draw trend lines to mark all major moves and then go and mark the trends that arent quite as big. If you ever run into trend lines that go in the same direction, mark them. To mark them, put lines along the lowest points of an upward trend and make lines following the tops of a downward trend.

Pivot Points

Most packages for charting include either a calculator or a tool that plots your points where it can pivot. These are levels where the currency pair is likely to turn. Most tools and calculators offer several numbers both below and above the current levels of the currencies you follow.

Making lines to mark the different barriers that we regularly see in the FX market can help us identify the points that a pair will most likely change. Take note of those levels where many barriers agree. This increases the chance of having success while trading. If you have many barriers that connect at a certain point, then it is very significant

To learn more about these barriers and their application on your charts, visit our website and www.lotsofpips.com

JARED PASSEY has worked with hundreds of forex traders, has created several high-probability strategies, trades professionally AND manages a foreign exchange fund. He loves helping traders and holds a free weekly forex analysis trading club. (You may reproduce this entire article on your site only if the above link is left intact.)