Support and Resistance Trading Strategy

When you begin your journey and take your first steps in online foreign exchange trading, one point you quickly come to realize is the prevalence of technical analysis and technical trading strategy. Whilst this may appear intimidating at first, with the correct foreign exchange broker, you can quickly come to understand these strategies and why they are so popular. One such reason is that they provide traders with key market insights which in many cases are proven correct.

 

The Fundamentals of Support and Resistance Strategy

Support and resistance are largely and loosely defined as follows: Support is the area at which the price should hold or stop falling, and resistance is the upper area within which prices will not exceed in a given market trend.

In technical analysis, support and resistance lines are plotted with angled lines known as trend lines. If a market struggles or reverses at a point twice in succession, a horizontal line is plotted. In an upward trending market, the higher and lows are both higher. The opposite is true of a downward trending market where both high and lows are lower. If you connect these highs and lows, extending your line to the right, you will clearly note the support and resistance zones.

When engaged in stock and forex trading, any reputable trading platform should provide you with a number of technical indicators which can assist with displaying these zones. Some of the best forex traders will regularly utilize these technical indicators to their trading advantage.

 

Types and Features of Support and Resistance

Support and resistance levels can be either minor or major. Hen forex currency trading online, you will soon come to recognize these levels and patterns which develop in order for them to establish.

An automated (or mechanical) trading system is a combination of hardware and software that uses a specific set of rules to execute trades 24/5.Forex Auto Trading Systems (Pros and Cons)

What is an Auto-Trading System?

An automated (or mechanical) trading system is a combination of hardware and software that uses a specific set of rules to execute trades 24/5. Once programmed, an auto-trading system can automatically open and close positions via the use of a computer, a trading platform, and an internet connection. The entry/exit rules can be the subject of multiple conditions including price, volume, time, volatility, etc.

The proper use of a Forex auto-trading system requires state-of-the-art technology and a reliable Forex Broker.

Here are some key pros and cons when using a Forex auto-trading system:

 

(√) Auto-Trading Pros

(1) Automation (Saving Time)

As an auto-trading system trades 100% autonomously, traders can save precious time and focus on other fields of their life.

(2) Trading 24/5

An auto-trading system can trade without sleep or rest on a 24/5 basis.

(3) Speed of Execution

An auto-trading system can analyze the market considerably faster than any human trader but also to execute trades at a glance. This can be a great advantage in times of extreme volatility (i.e. times of news releases).

(4) Objectivity of Decision Making

Human traders usually suffer from stress and follow an emotional decision-making procedure. Auto-trade systems follow their programming rules in a 100% objective and repeatable manner.

(5) No Fear or Greed

Fear and greed are some of the worst enemies of every trader. Fear prevents the trader from accepting necessary risks. Greed prevents traders from closing out a bad trade or can motivate traders to maintain their positions longer than they should.

(6) Implementing Complex Strategies

An auto-trading system can implement complex and advanced strategies such as High Frequency Trading (HFT) strategies.

 

(x) Auto-Trading Cons

(1) Cost

A decent auto-trading-system requires the use of state-of-the-art computer technology and a Forex Virtual Private Server (VPS). They both cost.

(2) System failures

System failures may occur. Moreover, a locally running auto-trading system may lose its internet connectivity and crush. Some auto-trading systems cannot recover effectively from a system breakdown.

(3) Difficult to Control Losses

If market conditions become unfavorable, an auto-trading system can suffer a substantial number of losing trades.

 

Conclusions

An auto-trading system offers a great number of advantages over manual trading. The key advantage is the lack of fear and other emotional limitations but also the lack of physical limitation (sleep). On the other hand, auto-trading systems cost serious money and require a sophisticated software programming in order to operate properly. The implementation of an effective money management system is also extremely important for every auto-trading system.

 

■ Forex Auto Trading Systems (Pros and Cons)

ForexExperts.net Blog (2018) 

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