welcome to this video on forex trading for beginners and this is barry burns with top trading. today we're gonna tackle a topic that is one of the first things that ever learned when i took a formal class and technical analysis but i rely on it heavily to this day 49 years later well actually my dad started teaching me and i was eight years old so
i think i took that class like 20 years later but still a long time ago long time ago and this is very basic stuff but as is true with many things whether it's sports or academics or just life in general the basic things are often the best and so this is good with your beginner intermediate or advanced and basically what we're talking about is
looking for support and resistance and major highs and lows in the market that just stand out to the naked eye and the market logic when i call market logic of that is meaning why would this actually work what's the reasoning behind why this works in other words not just theory but there's a practical reason why would
work is very simple that markets are essentially a big huge international auction place and the more people that see a supporter resistance level the more participants are likely to respond to that support resistance level to buy off of it to sell off of it take profits into it etc and so have has a self-fulfilling prophecy
it's kind of funny some people say well that's just a self-fulfilling prophecy and my point as well but that's exactly why it works so why would you diminish that it's just a self-fulfilling prophecy in the markets in an auction place yeah people get excited about something where they're not interested in that
affects the price whether it's driven up or whether become stagnant has to lower that's exactly how markets work so a couple of points here now i have a mathematical formula that i use for drying these ivs automatically drawn on but the basic concept again is what we'll most people see what will the vast majority of the people see what just
stands out on a chart that everyone is going to see that as a major hi yeah we see this whole level in here as a high that really stands out in the market now this is the top dog training principles of three the principle of three and again it has a market logic to it so we've got high here market comes down to
retest that once goes back retest twice comes back retest of the third time if the market does not go above that level after three retests it's likely not going to go and again it's just the psychology the mass psychology should say of the markets where people are saying you know the market is retested this price level now three times and it
hasn't broken above it it's probably not going to why these people aren't willing to pay more than that they don't see more value than that price level 4 in this case the dollar um and so we've tried three times where we tried three times not going so probably not going to go and so it goes down now where does it go
it goes to the very next support level as defined by what a major low so let's go back and see where that came from they came from there but actually goes people back before that actually goes all the way back to here into here so again you see 12 can see these levels marketing back to it again 34 comes off of it
now this is what will often happen so the market now this the other point of the central principle of three is that it works best when they are close together why because that stays in the memory of traders so that's pretty much the point people are looking at it and saying within a short period of time relatively
short period of time where you can see it on the charts all right there in the chart and you see it you don't have to scroll back and look back a year or two then it's right in people's awareness and that's why it works that principle of three does not work as well if it's over a long period of time like this this is 2016 and we have to go all the
way back here to going back over a year so we're going back about a year so therefore it's not as readily available now with some people say it absolutely they will and for that reason people did respond to it so the market came down 123 try to three times and then made a big
move up because people gave up on shorting the market here they thought okay well the market thinks it's worth more than that market mean meaning the market participants globally and so yeah it went up quite a bit but then boom and this time it just slid right through now there's one little bar there that shows that the market did acknowledge that
support level and that is this one right here at a very neutral bar i just call that a bar of hesitation so it didn't bounce up off of the level it's not a bullish parts and a bearish bar it's just that the market participants are again are like oh we know we're into this well-known support level and so for one day the market hesitates now
remember support resistance levels are broken all the time they don't hold every single time if they did well the market would never be able to go anywhere right so of course support resistance is broken but this is these are areas where we look to potentially buy potentially sell potentially take profits into and you need to obviously
use other things along with support resistance you can't use just support resistance alone it's one of the four energies of my five energy methodologies to actually step 4 of 5 that we look at in my very rule-based objective training methodology ok let's look at one more example here
so i switched over to a different market now and just to show that this works on all markets and works on all time frames as well but so this one here we've got a high-protein here significant hi significant low and the market goes right back to that high now this time it breaks through support all right now so break through those kind of choppy a
little bit where they come back to that comes back to resistant so this is again that very basic concept that is called making my arrow here so this would be support at this point potential support and support becomes resistant so once the market breaks through a support line it goes blue it then if the market retest that it becomes resistance again
very basic concept and technical analysis one of the the few basic traditional concepts that i find actually continues to work today lot of the traditional stuff i don't mind works anymore it's interesting i get a lot of people posting on youtube saying you know i'm doing it wrong that's right i'm doing it wrong based on
the classical technical analysis because i don't believe classical technical analysis by and large works very well anymore into these markets markets have changed dramatically now that we have flash trading high-frequency trading got algo trading we've got your commissions are low everybody's got direct access to the market has changed the way the
charts move the way the chart patterns are created and so a lot of the classic stuff yeah doesn't work anymore so that's right i'm heterodox i don't hold the line doesn't mean i don't know what i'm doing it means i reject the old classical style so this is part of one of the few things in traditional
technical analysis of mine does still so anyway then we come back down here and put in a low retrace back up where we find are supported hold support here goes back up where to go to next again that support that becomes resistance and so you can see the market really does just responding these i would say are the most important support resistance
levels of all so if you're wondering with forex trading whether it's for beginners or even stock trading emini futures commodities whatever your trading to mean these types of levels are the most important support resistance levels that there are so definitely have the minor charts watch these levels in conjunction with other
things including cycles are very important by the way people often ask how do i know if the markets going to hold support here or break through it great question very important question number one is is it time for the market to put in a low ese culo and number two is this market moving down with tremendous strength or momentum and so
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