The best tool to trade the Forex Market

Since the market is so slow, I thought about writing about the tool that changed the way I trade, in fact, it changed the way I see the market for ever.

Are you ready?

The name of this tool is…

Support and Resistance levels

Did you think I was going to show you a new indicator?

Nah!

Long live Support and Resistance levels!

This is how I use support and resistance level (and you can use them too)

  • I use long term S&R levels to determine which way to trade (bullish, bearish, no-trade)
  • I use short term S&R levels to pinpoint my entries
  • I also use short term S&R to take partial profits (if I’m going long from a short term support level, then I take partial profits around the next short term resistance level).
  • Long term S&R levels to take profits
  • I use S&R levels to create a trading plan for each currency pair (e.g. if the market breaks an important resistance level I’ll start looking for long opportunities).

What else do you use S&R levels for?

What’s your favorite tool or indicator to trade the Forex market?

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Raul Lopez

I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .

  • Eviano

    i seem to be confuse about the  HOPS and LOPS. For instance if i see a reversal formation (candlestick) in the daily chart and in the next 3 to 6 days, the price did not cross HOPS2 and LOPS2, can that candlestick formation still be valid?

    • Raul Lopez

      Hey Eviano, yes, of course… candlestick formations are still valid… the only way I wouldnt recommend you to go long if the market is trading below LOPS1… and viceversa.

      Cheers,

  • Alex Kruze

    Hi Raul
    Do you use simple TA(for s/r) or you see S/R levels in different way? For example, impulse from consolidation or high/low structure or maybe something else? 
    Also, what do you mean by looking for long oportunities, i mean what is your signal for long? Is it candlestick pattern or something else? Thank you

    • Raul Lopez

      Hey Alex, I like to simplify things. If the market it’s being rejected from an important level (S&R) I try to follow the market… 

      The signal is out of the scope of this post, but my entries varies depending on the market condition, sometimes I use candlesticks, some other breakouts, retracements, etc I just try to follow the market… 

      Hope this helps, if you have more questions let me know.

      Cheers,

      • Alex Kruze

        Thank you for reply. You are right, its offtop, sorry for that. I am just wondering about your entries, however, entry is not the most important thing, i think. 

        May i ask you, after 10y of trading behind your back, what is your conclusion about- who moves the market? I believe that price moves from one level to other, from support to ressistance, but why and who? What do you think Raul?

        • Raul Lopez

          Hey Alex, thanks again for your comment. I couldnt agree with you more, the entry is not the most important (nor the second most important) think in when trading… 

          Great question! It’s been more than ten years and I have stopped trying to figure out the “whys” of the market. I’m no longer interested in who is moving the market, sy is it moving, etc. Because the truth is, nobody knows for sure… we can only speculate… 

          But you know, we dont need to know who is moving the market or shy is the market moving like it is in order to profit. 

          So our main goal is just to determine what the market is likely to do. 

          What do you think?

          • Alex Kruze

            Maybe you are right, i dont know, because i still want to know who is running the market, HOW “they” move market, i quit trading moving avarages, despite of making profit with them, only because of idea, that “they” manipulate market with the same method, in the same way almost everyday, and i want to see and understand what are they doing in that very moment. 

            I was looking on naked charts for one month, everyday, just trying to “catch” this pattern, because logically, marketmaker moves market  with a several methods, he cant do one operation everyday in different way, he also has a trading plan, i think.  Same as us, we cant trade everyday with different method, Lets say every profitable trader has his trading plan, has his own signal for entry and so on, and i think that marketmaker has the same thing, he knows how to accumulate his position, he cant do this everytime differently, and i believe we can see it on charts, how they move price, i mean patterns that repeats.

            You are right, we dont need to know who is moving the market, how they are moving it, we can make profit without this knowledge, BUT, i am addicted from this idea, and i cant do anything, just move forward and search. 

            And i think i found something. Now i am focusing on fakeouts near s/t levels, do you use fakeoutsd for your analysis?

          • Raul Lopez

            Hey Alex, I know that feeling, I was once in your position, I just dont care anymore, because it really doesnt matter, knowing that information doesnt make you richer… 

            At the end, what makes you richer is your analysis, if you trade the right currencies, at the right time, when you know what the market is likely to do… This is what techincal analysis is all about, trading based on what the market is likely to do… 

            Knowing the whys is more about fundamentals… 

            I just know that the market is differente from day to day, it might seem equal, but it’s just similar, therefore we need to trade with a different strategy from day to day, understanding what the market is likely to do that day… 

            And it’s exactly what I try to so every day, have a trading plan for each one of the currency pairs I’m monitoring… 

            Fakeouts are breakouts against the sentiment of the market… 

            Cheers,

  • Ganang Prastia

    Hi Raul Lopez
    Yeah you make S&R simply with your HOPS-LOPS method. It’s work very well.
    One question for you, what is “break” definition? Candle must be closed below or above S&R level? Or there is other definition for you?
    I just not clear about valid break for short term trading.

    • Raul Lopez

      Hey Ganang, I consider a valid breakout when the market forms a complete candlestick above/below the level on the H1 chart. 

      HTH