Reversal Forex Support and Resistance Strategy

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Reversal Forex Support and Resistance Strategy

This system uses price action and works on a 4 hour timeframe. Here is the simple analysis. If the price bounce up to the level of support then you can
go long and if it bounces down to resistance, then you can sell. This system is applicable to Forex, futures and indices.

On Candlestick Closings:

Entering a trade is triggered at the close of a candle,

For sell signal:

  • When it touches the resistance or support level as long as the close is no more than 20 pips away from that level and no less than 3 pips.
  • If the price goes up and closes 14 pips below a resistance level (or anywhere in between 3 to 20 pips).
    Sell on the next candle.

For buy signal:

  • If the price goes down towards a support level and closes 4 pips above the support level (or anywhere in between 3 to 20 pips).
  • Buy on the next candle.

On Stochastic Indicator:

Once the conditions on the Candlestick closing are met, you MUST look at the stochastic indicator with 5,3,3 settings

Sell signal:

  • The Stochastic must be above the 80 line territory or has touched.

Buy signal:

  • Stochastic must be below the 20 line territory or has touched.

Look for either the stochastic red line or blue line to touch either the 80 or 20 line value.
Touching the 80 or 20 lines can’t be credited for until the current candle actually close.
You will find on many occasions that the 80 or 20 lines get touched, but then retreats back once the current candle reverses.
The Stochastic crosses down when the blue line goes below the red line, and crosses up when the red line goes above the blue line.
Though this is not necessary but it can decrease trading risk.

Reminder:

  • Do not buy if the next resistance level is less than 50 pips away.
  • Do not sell if the next support level is less than 50 pips away from the resistance level where conditions were met.

If you see that the price has not been respecting it recently and closes below/above that level and then closes back above/below it, the disregard it.
Levels that are not respected are kept on your chart so that you consider them if you are already in a buy/sell trade but never enter into these levels.

Entry is not valid if you see a line-up of entry conditions and the level has not been respected before.
All you must do is look at the previous 1 or 2 days or whenever the last test was. You don’t have to look at the past 30 days.
The entry is good when you actually see the price not respecting the level in the past tests and it just started respecting the level in the last test. Enter when conditions are met.

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