The two biggest differences between forex and binary is that forex profits and losses can be much, much larger and that forex trading requires stop-loss and profit targets as much if not more than the original entry. Because forex pairs tend to trade within well established ranges support and resistance targets within those ranges are very useful as targets for stop-losses and profit-taking too.
The basis for this technique is to use stochastic for trend following entries. The trends may be near, short or long term depending on your style, the time frames you like to trade and the entry points you find. The key is that you want to trade bullishly when prices are moving up and bearishly when prices are moving down. If you haven’t read my article on the Stochastic Power Play I suggest you do so.
To find entry begin with the daily charts and draw key support and resistance lines, the two closest to the asset price are the ones you want to focus on. Next move down to the hourly chart and see if there are additional support/resistance lines you could draw that are within the longer term lines drawn on the daily chart. Next move down to a 30 minute, 10 minute or 5 minute chart, whatever your preference is, and look for even nearer term support and resistance levels if they are present.
Signals come when price action crosses a support or resistance line or confirms support or resistance at one of your lines. To weed out false and weak entries apply the trend following rule as well, that is, only take entries that are in line with the trend. For example, if prices are trending higher they might dip below a line briefly while testing it for support. The cross below would be a false signal, the cross back above would be the good signal.
In terms of strength and duration you might expect to hold a position depends on which line it is you are trading from. A support/resistance line drawn on the 5 minute or 1 hour chart will not produce the same effect as a line drawn on the daily chart. The daily charts are by far the strongest signals and may lead to movements lasting days, week’s or months. The hourly charts are in the middle and may produce the same strong signal as the daily chart but are more likely to produce a movement lasting a few hours, days or weeks at best. The shorter time frames are the weakest and will provide the shortest duration movements.
Profit taking targets are the next higher or lower support or resistance line. If the trade is bullish and prices are moving higher from a support line the next resistance target is your profit target. When prices reach that level, or if they begin to show signs of topping while near it, it is advisable that profits be taken. The stop-loss can be set initially at -5% of your position. This will give the asset some wiggle room before making its move higher and will not damage accounts if triggered. The IQ Option forex platform lets you set a target profit as well which can be put at 100% to start although savvy traders will close on reaching a specified price target like support or resistance.Trade now
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future
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