In the forex faq session today, we have a question from one of out fellow traders asking the below question:
I am having a problem in knowing the support and resistance levels. Assume today is Monday and the Eur/USD at 9am was 1.32 then at 10am it was 1.30, how do you do the Supp n Resistance.
If you have read my blog post, you will know that there are several ways of finding important support and resistance levels.
So if I did not interpret your question wrongly, you are saying that these levels of support and resistance are constantly changing, so which one should you take into consideration.
What we are interested in is to find the level where 2 or more such support and resistance coincide as it will make that particular level a stronger support and resistance.
It is very easy to identify 1 level of support and resistance but this kind of level usually do not hold the price when the price approaches it.
Therefore as a trader, we should be constantly in search for levels where there are confluences of support or resistance. Therefore your question stated that you found a support at 1.32 and then at 10 a.m. it has changed to 1.30. This does not matter.
What you should be searching is whether this change in level has coincided with any other levels like the pivot points or the Fibonacci.
It is only with the confluence of these levels that the price will most probably be repelled by them and this is usually where we enter a trade to trade the repulsion.