I am currently reading 'Naked Forex', a book which introduces how to trade without using any indicators. And it stresses the importance of a clean Candlestick chart.
As of now, I just finished the topic on Support and Resistance line, and below is the summary:
- They are the most important thing for a Naked Trader
- They are zones rather than lines
- They are zones that are frequent rejects a trend from progressing further
- Funny thing about them is that even if you take a Daily chart from a few years again, they might also be the same Resistance or Support line. The author mentioned about once he got burnt by a hot pizza stove and never forgot it. It is the same as these zone, people remember them from way back.
- To better identify them, you can also reference it with a higher period chart. Lets say you use Daily charts. What you do is you open another Weekly chart, which is the next level, and draw the lines from there. The method which I use is that I instead of 100 Daily Candles in one chart, I open 250 Daily Candles. I get a clearer picture from there.
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