How to Trade At All-Time Highs and Lows

How to Trade At All-Time Highs and Lows ; How to Trade At All-Time Highs and Lows

Markets Desk·January 20, 2021

How to Trade At All-Time Highs and Lows How to Trade At All-Time Highs and Lows?

Introduction!

Normally, when we identify resistance or support levels, we look at previous lows or highs to make these adjustments. For example, on the H4 chart below, the GBP / USD pair has been spinning at 1.33 for a while, so it would be wise to choose this level as a tactical support point. Very practical, right? Basically, you trade with the past performance of the asset.

Let's Assume! What if the currency pair reaches a region where it has never been before, namely an undiscovered region? This is the case for the daily USD / TRY pair in the chart below. Although 7.50 support and 8.50 resistance are easily set, this can only work in local, intraday trading and when the currency pair is below 8.50 resistance. But what if it reaches 8.50 again and surpasses it? How do you adjust the resistance levels?

Hypothesis! The first thing to check is a larger time frame. Sometimes, you can't see the price-performance enough by looking back: It can be very difficult to see the lowest or highest of multiple years on the H4 or daily chart. Therefore, you need to switch to a weekly or monthly time frame. However, the monthly chart below for the USD / TRY parity shows that the price has never risen this much in the last twenty years. So what should be done? How is the resistance level set here?

Stages to be Followed

Basic Knowledge What you have to do is to make a graphic projection. But before doing this, you must make sure that no change in the underlying layout is expected for your asset. It's like planning a route in a sea: you arrive where you follow a certain trend. If the wind changes, the trend also changes - this will take you in a completely different direction that you could not plan for. So, assuming the winds keep blowing in the same direction as they have been before, you can only predict your future position. Speed Now observe the speed that the trajectory of your asset follows. You can't really predict accelerations or slowdowns, so the only way to reflect the price action into the medium-term and long-term future is to assume that it is on average at the same pace. After doing that, you will now have an expected price action chart on your screen that can help you identify appropriate resistance or support levels. The goal is complete. Practice For example, the daily chart for the USD / TRY pair below. For

Frequently asked questions

What is the main challenge when a currency pair trades in an undiscovered price region?

The main challenge is the absence of historical price data to establish conventional support and resistance levels, making it difficult to predict where price reactions might occur based on past performance alone.

How can traders adjust their analysis when an asset breaks through to a new all-time high?

Traders can switch to analyzing larger time frames, such as weekly or monthly charts, to gain a broader perspective on price performance and identify potential macro-level support or resistance that may not be visible on shorter-term charts.

Why might traditional support and resistance levels be less effective in new price territories?

Traditional levels are based on historical price highs and lows; in undiscovered regions, these reference points do not exist, so levels set in the immediate vicinity are often only useful for local, short-term trading and can be quickly invalidated.

What is a key tactical consideration when a pair is consolidating at a specific level, like GBP/USD at 1.33?

When a pair consolidates at a level, that price can be treated as a tactical support or resistance point, as repeated tests demonstrate its significance, allowing traders to use recent price action as a guide for near-term decisions.