As the name suggests, one method of trading support and resistance levels is right after the bounce. Many retail forex traders make the error of setting their orders directly on support and resistance levels and then just waiting for their trade to materialize. Sure, this may work at times but this kind of trading method assumes that a support or resistance level will hold without the price actually getting there yet. You might be thinking, “Why don’t I just set an entry order right on the line? That way, I have assured the best possible price.” When playing the bounce, we want to tilt the odds in our favor and find some sort of confirmation that the support or resistance will hold. For example, instead of simply buying right off the bat, we want to wait for it to bounce first before entering.
In a perfect world, support and resistance levels would hold forever, McDonald’s would be healthy, and we’d all have jetpacks.
In a perfect forex trading world, we could just jump in and out whenever the price hits those major support and resistance levels and earn loads of money.
The fact of the matter is that these levels break… often.
So, it’s not enough to just play bounces. You should also know what to do whenever support and resistance levels give way!