Forex trading is a complex and volatile market that requires a lot of knowledge and skills to navigate successfully. One of the most important skills that traders need to learn is how to identify and count forex levels. Forex levels are important because they help traders to identify potential support and resistance levels, which can be used to make informed trading decisions. In this article, we will discuss how to count forex levels as a market maker.
Before we delve into the specifics of how to count forex levels, it is important to understand what forex levels are and why they are important. Forex levels are price levels that have historically acted as either support or resistance. Support levels are price levels at which the market has historically bounced back up after falling, while resistance levels are price levels at which the market has historically fallen back down after rising.
As a market maker, your job is to provide liquidity to the market by buying and selling currencies. To do this effectively, you need to be able to identify and count forex levels accurately. Here are some steps to follow when counting forex levels as a market maker:
Step 1: Identify the Trend
The first step in counting forex levels is to identify the trend. This involves looking at the price chart and determining whether the market is trending up, down or sideways. A trending market is one in which the price is consistently moving in one direction, while a sideways market is one in which the price is moving within a range.
Step 2: Identify Support and Resistance Levels
Once you have identified the trend, the next step is to identify support and resistance levels. Support levels are price levels at which the market has historically bounced back up after falling, while resistance levels are price levels at which the market has historically fallen back down after rising.
To identify support and resistance levels, you can use a variety of tools and techniques, such as:
– Trendlines: Trendlines are lines drawn on the price chart that connect two or more price points. A trendline can be used to identify support and resistance levels.
– Moving Averages: Moving averages are indicators that smooth out the price data by calculating the average price over a specific period of time. Moving averages can be used to identify support and resistance levels.
– Fibonacci Retracement: Fibonacci retracement is a tool that uses horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the price continues in the original direction.
Step 3: Count the Forex Levels
Once you have identified the support and resistance levels, the next step is to count the forex levels. Forex levels are price levels that have historically acted as either support or resistance. To count forex levels, you need to look for price levels where the market has historically changed direction.
For example, if you are looking at a bullish trend, you would start counting from the lowest point of the trend and look for price levels where the market has historically bounced back up. Each time the market bounces back up, you would count that as a forex level. The same process applies to a bearish trend, but in reverse.
Step 4: Use the Forex Levels to Make Trading Decisions
Once you have counted the forex levels, you can use them to make informed trading decisions. For example, if the market is approaching a resistance level, you may want to sell your currency because there is a higher chance that the price will fall back down. On the other hand, if the market is approaching a support level, you may want to buy your currency because there is a higher chance that the price will bounce back up.
In conclusion, counting forex levels is an important skill for any market maker. By identifying support and resistance levels and counting forex levels, you can make informed trading decisions and provide liquidity to the market. With practice and experience, you can become an expert at counting forex levels and navigating the complex and volatile world of forex trading.
