323# Psycological levels Scalping System

Pyscological Levels Trading

Submit by Jeff 20/04/2012

What I’m going to write is strictly what I believe in trading. They are not necessarily right or wrong. It just works for me. I trade the mid/long-term trend using daily charts. I want to share with you simple trading tactics using Support and Resistance. Please note that this is not a trading system, it’s just a method that can be used by anyone and embedded in any system.

The objective of the tactics is

1) to ride on trend

2) maximize potential gain by scalping

3) maintain a healthy level of risk exposure (yup don’t reduce the risk, maintain it).

I will begin with a brief introduction of support and resistance (SR).

There are many kinds of SR levels.

1) pivot levels

2) trendlines

3) horizontal lines

4) Fibonacci’s levels

5) psychological levels – round numbers like 1.3400, 1.3500, 1.3600.

6) many-many more ….

In this method, we will only use one of them. Psychological levels. I use Fibonacci levels as well sometimes but it’s beyond the scope in this discussion.

Why psychological levels?

Forex is decentralized. It means the data that you see varies between platforms. Hence, any lines drawn will vary. Some people draw the trendline using close/low price of the candlestick. Some use SMA,EMA with median/low/high/close price. You get the idea. However, traders are human and they share one thing in common, they are psychological.

Jesse Livermore and a number of traders in Market Wizards are also using these

psychological levels.

Let’s say we are trading EUR/USD (bull market) with 50 pips stop-loss.

This is the method

1) enter a buy position (position A) at significant support level (e.g 1.3300 … SL =

1.3250)

2) trail the stop. SL will always be at 50 pips away from the price. SL never moves

down.

3) If the SL level >= buy price for position A (profit protected)

a. enter another buy position

b. SL equal to the position A’s SL

c. TP equal to the nearest round number resistance. If you buy at 1.3323, TP