New article Identifying Trade Setups by Support, Resistance and Price Action has been published on mql5.com:
This article shows how price action and the the monitoring of support
and resistance levels can be used for well-timed market entry. It
discusses a trading system that effectively combines the two for the
determination of trade setups. Corresponding MQL4 code is explained that
can be utilized in EAs that are based on these trading concepts.
This article covers a trading methodology
that can be used in any FOREX, stock, or commodity market, as well as
MQL4 code examples that can be used in an Expert Advisor that would be
based on this methodology.
Price action and the determination of
support and resistance levels are the key components of the system.
Market entry is entirely based on those two components. Reference price
levels will be explained along with effective ways of choosing them. The
MQL4 examples include parameters for minimizing risk. This is done by
keeping market exit references and stops relatively close to the entry
There's an additional benefit of allowing
higher volume trades, regardless of account size. Lastly, options for
determining profit targets are discussed, accompanied by MQL4 code that
enables profitable market exit during a variety of conditions.
If you look at any price chart, for any
market, having any timeframe, two facts will become apparent that are
based on characteristics which consistently appear. One of these facts
is that the market price shown at any point in time doesn't stay the
same for very long. Given enough time, the market price will have
significantly changed. Any price shown on the chart can be used as a
Certain prices, however, act as better
references than others. We'll get to that shortly. The second
aforementioned fact is that any chart will have certain prices at which
point the market trend will reverse. Often times, the market will
repeatedly reach these price levels and change direction shortly after.
These are the support and resistance levels that virtually any trader
has heard of. Support is a price level below which the market will not
drop. Resistance is a price above which the market won't go.
Also known as tops and bottoms, these
price levels send the message that this is as far as the market will go
(for now) and reversals will begin near these levels. Support and
resistance levels are good prices to use as reference levels, as they
signify prices at which a new trend can start with higher probability.
Other prices, found approximately midway between two relative support
and resistance levels, are also good reference levels. We'll refer to
these as midpoints.
Any portion of a price chart can be
marked off with horizontal lines at relevant support, resistance, and
midpoint prices to be used as references. An example of this is shown in
Fig. 1 below.
Fig. 1. Support, resistance, and midpoint
Author: Michael Janus
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