Forex trading is an activity that involves buying and selling of currencies in order to make a profit. Traders use different indicators to identify trading opportunities, and one of the most commonly used indicators is resistance. Resistance is a level at which the price of an asset is expected to stop rising and start falling. In forex trading, resistance is used to identify potential selling opportunities. However, the question remains, how far back should traders check for resistance?
The answer to this question depends on the trader’s trading strategy and time frame. Some traders may choose to look at resistance levels over a long period of time, while others may focus on shorter time frames. In general, the longer the time frame, the more reliable the resistance level is likely to be. This is because longer time frames are less affected by short-term market fluctuations and are more reflective of long-term market trends.
When looking for resistance, traders can use different tools and methods. One of the most common methods is to use technical analysis. Technical analysis involves analyzing past price movements and using this information to predict future price movements. Traders can use different technical indicators such as moving averages, trend lines, and Fibonacci retracements to identify potential resistance levels.
Traders can also use fundamental analysis to identify resistance levels. Fundamental analysis involves analyzing economic and political events that affect the value of currencies. Traders can look at factors such as interest rates, inflation rates, and political stability to identify potential resistance levels.
Once a potential resistance level has been identified, traders need to determine how far back they should check to confirm the level. As mentioned earlier, the time frame depends on the trader’s trading strategy. If a trader is using a long-term trading strategy, they may need to look back several years to identify reliable resistance levels. On the other hand, if a trader is using a short-term trading strategy, they may only need to look back a few weeks or months.
Traders should also consider the volatility of the currency pair they are trading when determining how far back to check for resistance. Highly volatile currency pairs may require traders to look back further to identify reliable resistance levels. This is because volatile currency pairs are more likely to experience rapid price movements, making it challenging to identify reliable resistance levels using shorter time frames.
In conclusion, the question of how far back to check for resistance in forex depends on the trader’s trading strategy, time frame, and the volatility of the currency pair being traded. Traders should use technical and fundamental analysis tools to identify potential resistance levels and then determine how far back to check to confirm the level. By doing this, traders can improve their chances of making profitable trades in the forex market.
