Support and Resistance is the most important concept in forex trading trust us. If you don’t know how to correctly draw support and resistance levels on your chart, you are doomed to fail as a forex trader. Did you read the post on how to trade naked on M5 timeframe? When you start understanding the concept of support and resistance price action will start making sense for you on the different timeframes. Highs and lows formed on daily and weekly charts are important areas of support and resistance.
Support is the area where price bounces up. When you drop a rubber ball , it hits the floor and bounces up. Support is just like the floor. When price hits support, it bounces up. In the same manner, when you throw the ball up in room, it hits the ceiling and bounces down. Resistance is just like the ceiling of a room. When price hits resistance, it bounces down. Watch this 1 hour 15 minute video tutorial that explains in detail how to correctly draw the support and resistance.
Once a resistance is broken, it become a support and in the same manner when a support level is broken, it turns into resistance. Keep this in mind when support/resistance is broken, it means either a false breakout or a true breakout. In case of a false breakout, price breaks the support/resistance then starts moving back again. In case of a true breakout when support/resistance is broken, it means start of a new trend which can be a big move in the market. Support/Resistance is an important concept in naked trading. Naked trading means trading without indicators solely based on price action. Did you read the post on how to trade naked on M15 timeframe? After having watched the above video tutorial and learned how to correctly draw support and resistance on your chart. you should also watch this 58 minute Support and Resistance Trading Strategy video.
Now when you understand the concept of support and resistance, you will start understanding what the market is planning to do. As said above, most important thing is to see if the support/resistance holds or breaks. If it support/resistance holds, you open a trade using support/resistance as stop loss. If support/resistance breaks then you open a trade in the direction of the new trend with support/resistance as a stop loss. When you are trading, the most important thing is risk management. You should take risk management very seriously when trading.