Dynamic Supports & Resistances

Dynamic support line of GBP/USD chart

Identifying dynamic support and resistance lines is very important in forex trading because they provide us very good trading opportunities with minimal risk. The support & resistance levels that we talked about early were horizontal but  dynamic support and resistance levels are not horizontal and they are inclined to an angle.

Dynamic resistance – In this figure price goes down while making lower highs and lower lows.  If we connect these lower highs, we see that they are in a perfect straight line with some inclination. Figure shows a dynamic resistance line in GBP/USD in 15min chart.

Dynamic support – Price goes up while making higher highs and higher lows. If the lower lows are connected, a perfect straight line is made with some inclination.

Entering to trades with dynamic S & R

The following figure shows you how to take trades when you see dynamic S&R are in the chart. Red line is a support line and white line is a resistance line. When you see the figure, you can clearly understand that trend is an uptrend. So therefore we try to take only buy trades (long positions). When price is rising after it met the support line, we enter a buy trade and we can take profits after price reached the resistance line. So then again wait until price go down to hit the support line and when price started to rice again, take a buy trade. Your stop loss should be about 1o pips below from the support line. However it is not good to take sell trades when price goes down after meeting the resistance line.

Dynamic support & resistance lines in GBP/USD chart

Important Tips about dynamic S&R

1. Dynamic S&R lines should be drawn by ourselves and at least 3 points should be taken to draw the line.
2. Always place stop loss at least 10 pips beyond dynamic S or R lines.
3. Placing stop loss below the previous low in a up trend or placing above the previous high in a downtrend is  also good.
4. If the main trend is an up trend(Bullish) take only buy orders and take only sell orders if main trend is a downtrend(Bearish).