Money Loser: Money Maker, I keep hearing traders talk about levels on the chart. “This is a key level,” they say. Or, “If it breaks this level, it’s going to fly.” What exactly do they mean by “levels”?
Money Maker: Good question, Loser. When traders mention “levels” on a chart, they’re usually referring to specific price points that have significance—like support and resistance. These are areas where price has reacted strongly in the past.
Money Loser: Support and resistance? Like floors and ceilings?
Money Maker: Exactly. Support is like a floor. It’s a price level where the currency tends to stop falling and may bounce up. Resistance is like a ceiling. It’s where price tends to stop rising and may drop.
Money Loser: How do you find these levels on a chart?
Money Maker: You look left on the chart—historical price action. Anywhere price has repeatedly bounced or reversed is a clue. For example, if EUR/USD fell to 1.0800 multiple times and then rose, that’s likely a support level.
Money Loser: Are these levels exact prices or zones?
Money Maker: Great catch! They’re more like zones—areas rather than precise numbers. Price might react around 1.0800, give or take 10-20 pips. So we talk about “support at 1.0800 zone.”
Money Loser: What makes a level strong?
Money Maker: The more times price has respected it, the stronger it is. Also, if it caused a big move in the past, that adds weight. Confluence with other tools—like moving averages or Fibonacci levels—also strengthens it.
Money Loser: What about round numbers? I see a lot of action around them.
Money Maker: Absolutely. Traders love round numbers like 1.1000, 1.2000. These are called psychological levels. They’re easy to remember, and lots of orders get placed around them.
Money Loser: How do traders use these levels to trade?
Money Maker: Many ways. They might:
- Bounce Trade: Buy at support or sell at resistance.
- Breakout Trade: Enter when price breaks through a level with strong momentum.
- Retest Trade: Wait for the price to break and then retest the level from the other side before entering.
Money Loser: Is that why price sometimes breaks a level, comes back, and then continues?
Money Maker: Yes, that’s the retest. It’s like the market checking if the level now acts in reverse—support turns resistance or vice versa.
Money Loser: Do you always trust a breakout?
Money Maker: Not blindly. You want confirmation. Look for volume, strong candles, or retests. False breakouts—or fakeouts—are common. That’s when price pierces a level but quickly reverses.
Money Loser: How do you avoid fakeouts?
Money Maker: Wait for the candle to close beyond the level, or use other confirmations like RSI divergence or economic news backing the move.
Money Loser: What about trendlines and channels? Are those levels too?
Money Maker: Absolutely. Diagonal support and resistance. Trendlines connect higher lows in an uptrend or lower highs in a downtrend. Channels are two parallel trendlines. They give you dynamic levels.
Money Loser: Do moving averages count?
Money Maker: Yes. Popular moving averages like the 50, 100, or 200-period often act as support or resistance. They’re watched by big players, so price often reacts around them.
Money Loser: Should I draw levels on all timeframes?
Money Maker: Focus on higher timeframes first. Weekly, daily, 4-hour levels are more respected than 15-minute ones. Start big, then drill down.
Money Loser: So trading is like navigating a map of important levels?
Money Maker: Exactly. Think of it like GPS for price. Levels help you know where price might pause, reverse, or explode.
Money Loser: Any last tips on mastering chart levels?
Money Maker: Practice. Look at charts, draw levels, and observe how price reacts. Over time, you’ll develop an eye for key areas. Combine with fundamentals and sentiment for extra power.
Money Loser: Got it. I won’t just watch candles float anymore. I’ll read the story behind them.
Money Maker: That’s the spirit. Price levels are the language of the market. Learn to read them, and you’ll stop being a money loser.
Esarasavi 