PASR is a total method. It revolves around PRICE ACTION at SUPPORT and RESISTANCE.
It is not just PRICE bouncing off SUPPORT and going to RESISTANCE or vice versa. It is about WATCHING what PRICE does at these important PRICE levels.
Understand why these levels exist and why they are there. They are levels where, at some point in history, BUYERS and SELLERS took control. They are levels where the BUYERS and SELLERS, in their own right, support or cannot support PRICE.
These PRICE levels are created by supply and demand during certain economic conditions. Supply and demand changes with each economic and political situation. What was once a PRICE level in a certain economic scenario may not be important or supported in a different economic situation.
Supply and demand will drive PRICE to those levels which are supported by the current economic and political conditions. Usually, these are levels identified in history but occasionally, each condition creates its own PRICE level.
Certain currency pairs, and GBPUSD is one of them, have PRICE levels where round numbers are important. We have to know what these round numbers are and what PRICE does at these levels.
PASR at its simplest is PRICE bouncing from SUPPORT to RESISTANCE and vice versa. Unfortunately, that’s not a rule, just a condition.
PASR is also watching what PRICE does, and how it does it, at these levels.
PRICE always respects PRICE levels previously defined as SUPPORT and RESISTANCE. Read that again with correct understanding.
Price ALWAYS respects price levels previously defined as support and resistance.
Just because PRICE slices through support and resistance doesn’t mean PRICE doesn’t respect that level. It DOES respect that PRICE – it just means that, at that point in time, it is not as important. The supply and demand conditions have changed such that the BUYERS and SELLERS are moving to different levels.
So, PRICE breaking through SUPPORT and RESISTANCE tells us as much as PRICE bouncing off SUPPORT and RESISTANCE.
However. it is not as simple as price breaking through a level and going to the next PRICE level. There are many factors to consider.
How did PRICE break through the level? The most important and significant question is, Where did PRICE close? Did it close above or below the level? Was it just a spike through the level?
What was the market sentiment when PRICE broke through the level? Was the bar just an average range bar or was it a bigger range bar? What were the bars before it – average or bigger?
Where is the next PRICE level?
PRICE breaking levels is not as easy to trade as basic PASR where we trade PRICE from SUPPORT to 1st RESISTANCE and RESISTANCE to 1st SUPPORT.
Students MUST learn basic PASR before moving on to other aspects of PASR. This will be and IS our basis for everything we do. This is instilling into our brain, mind and sub-conscious the equivalent of learning to ride a bike. Having learned to ride a bike we can move on to different types of bikes and maybe competitive bike racing.
So it is with trading. Learn basic PASR until you can do it upside down, inside out while hanging upside down from the Eiffel Tower with one hand while playing the whistle with the other hand.
The point is, basic PASR MUST be drilled home until it is embedded in your sub-conscious just like any other motor skill.
After learning basic PASR, understanding the next levels becomes easier. Try and do more and you will confuse yourselves probably resulting in losing trades.