Key Levels, Why They Matter

The purpose of key levels

Key levels are Support and Resistance levels where price could offer us a trade response.  These are levels where there is a line in the sand, where price should often pause. I explain key levels in depth within the Mastering course. https://eurusd-fxtrader.com/course/

The future key levels are best observed on larger time frames. The 240 & 60-minute charts will give you a broad view of these key levels. You can either take a note of these key levels or document the levels on your chart. Once you have identified the future key levels there is no need to continually eyeball the levels on the larger time frame go down to a smaller time frame.

EURUSD 240 Minute chart

Below is the EURUSD 240 minute chart. The important key levels ​are documented and identified. Note, we are not looking to predict the direction of price or cast our opinions onto the market. We are looking to identify key levels where price might respond so we can execute a manageable trade.

Within this chart, you can identify where price has consistently traded within each key level parameter. Keep in mind, this is a 240-minute chart and not used for trade entry. It is also not going to be an exact science and slippage through the key levels needs to be considered.

Trading chart

EURUSD 4 hour chart with Support and Resistance Levels

Breaking down key levels

For intraday trading, use the 60 & 15-minute charts to help you fine-tune your trade selection. If price has been trading in a tight daily range, you will find the 15-minute chart useful. If price has been stretching the daily range, you will find the 60-minute chart more helpful. Either way, both 15 & 60-minute charts should be considered as tools for intraday trades. We are looking for price structure. Price structure will be how price merged into the key levels and the structure in and around the key level.

Smaller time frames

Keep in mind, we have identified future key levels from the larger time frames. We have then broken this down into the intraday charts of 15 & 60-minute time frames.

Assuming we have been able to identify a high odds and low-risk level, we now break this down into a much smaller time frame. The time frame might be a 2 or 5-minute chart. At this point, you should know in your mind the exact level you want to execute the trade entry. Wait with patients. Your level may or may not get hit.

There is more to it

Never ever just take a trade based on the identity of a key level. There is much more to be considered. All of those many considerations we discuss in the course as well during the daily insights newsletter. Some of those considerations will be, time of day, Average true range, news, fundamentals, currency pair characteristics, price delivery.

The main purpose of this article is to help you understand how you can identify key levels. Trade selection, trade execution, and trade management are all a different beast.

Be mindful, just because you have identified a key level, this is not a license to take a trade. Important to also consider why you should not take a trade.

Happy Trading, Steve.

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