GBPUSD: Why You Shouldn't Rely Only On Support/Resistance Levels

So this may stir up some controversy but its not meant to be that way. Only that this is my own opinion and not meant to disparage other OP's who post trades based only on support/resistance levels.

First, let me say that yes, I firmly believe that support/resistance levels are important and that they do play a very important part in determining what happens to prices. BUT what I want to point out is that not all support/resistance levels are equal! If you wanted to draw all support/resistance levels on all time frames onto your chart, you would be left with a extremely cluttered and unreadable chart! One thing to keep in mind is that higher time frames always hold more significance than lower time frames. This is also a reason why patterns have a lower conversion rate on lower time frames. But also, support/resistance needs to be just a PART of the overall strategy and not the end all, be all of your trading strategy! You also MUST see and understand the BIG picture and not go and look at purely the support/resistance level on whatever time frame you are looking at. Also remember that, the lower the time frame you use, the smaller your expectations for the expected move due to that support/resistance level should be.

Look at my chart above. I have highlighted 2 "zone" in yellow. The longer one is a support/resistance zone that IMO, was of significance and that was proven because it became support after prices had broken the resistance. That is a big clue that this zone is significant! Now look at the smaller "zone" I drew. That IMO, is NOT a significant resistance zone because there is not much history behind it. Yes, it may cause prices to pause or even bounce from that zone but it will be broken and with relative ease. Important to note that STRONG support/resistance zones have a history of rejecting/supporting prices and not just recent prices.

What else is important to know is what is happening on the BIGGER picture and how that affects or does not affect the support/resistance zones. You can see that on my chart here. I am projecting that prices are to move on higher. I am able to project that because I have a good grasp on the current wave count and also, on the BIGGER picture, there is a POTENTIAL Bat that does complete very near to a MAJOR S/R level that I have also marked on my chart. Patterns that complete near to MAJOR S/R levels carry more significance.

So you see, by seeing the BIGGER picture, you can assign relevance to support/resistance levels and know in advance if they are significant or not. If they are not significant, I would not take trades based on them alone. Know what is happening on the BIGGER picture and you have much more complete understanding of what the chart is telling you. If you don't, then you are just throwing trades against the wall and seeing which ones stick!

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Close to completing the POTENTIAL Bat. Now I hope you understand better about support/resistance zones and how to identify its relevance. Don't just blindly listen to someone say it is. Do your homework!

Even after the Bat gets completed, it DOES NOT mean to automatically SELL! Wait. Be PATIENT and let prices PROVE that this wave up is over.