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Another really useful piece of information that involves price movement is the Average daily range of the currency that you are trading.
Each pair will have a range that it usually stays within on a day to day basis. For example, at the time of writing this the average range on the Eur/Usd was 132 pips per day.
So how can you use this information?
Well let’s say that you are looking to go long and the pair you are trading has already fallen so that it has exceeded its average daily range for that particular session… in this scenario not only do you have your confluence of S&R at your entry and your confluence of reasons to be trading in that direction but now you have the added fact that it has gone to its usual maximum limits in terms of downward movement thus making any further downward movement unlikely especially as price comes to your expected level of support.
Conversely, let’s say that you wanted to sell at that time; you would want to think twice about that trade because the daily range has been completed in that direction so any further move to the downside is unlikely and you never want to be taking trades that have an unlikely chance of moving in your desired direction.
Usually you will need a range calculator for this to make it easier which you can get no problem on most charting packages but it can be a really useful tool to add to your arsenal which is why I included this information. If you do require a calculator, ask around the forums and you should be able to find one.
Next: Top Down Analysis