Forward trading by levels can become the basis of a profitable trading strategy. I have already touched on the subject of levels in my articles. But today I want to tell you about their special form. These are so-called bank levels on the forex market. What are they and how can they help a trader in trading? You’ll find the answers in this article.
What are bank levels
Forex market quotes are of course influenced not by you and me, but by major players, including the Central Bank. They have the opportunity to significantly change the exchange rate of the national currency through interventions. Naturally, the volume of the bank’s transactions and their exact time, we can not know. But their prices may differ significantly from those observed in the market. In this regard, the market can see a sharp rise or fall in quotes. These levels are called bank levels.
How to define bank levels on Forex
Traders have developed a special methodology to do this. For this purpose Close prices of trading sessions are used. The central bank usually makes large deals after the market has completed its operations during the trading session.
The most significant is the closing level of the London session. In Moscow, it’s 19 hours. In order to determine the bank level, it is necessary to set a period separator on the hourly chart of a trading instrument price in the MT4 terminal. After that, we need to conduct the level at the price of Close of the last candlestick at the auction in London. It can be considered as a support or resistance level.
Examples of bank levels
As we can see, in the last hour of the London trades there was a sharp decline in quotes. This could indicate a major Central Bank deal. Through the closing price of the 18-hour candlestick (the last one at the trades in London) we carry out the bank level, which later became a support.A here is an example of the formation of the bank resistance level:
General recommendations on working with bank levels
For these levels to be useful in trading, you need to consider a few important points.
While we don’t have any information about the operations of major players, including Central Banks, these levels are just assumptions. This means that they cannot be considered as the main signal for making a trading decision.
Bank levels are only an additional analysis tool and need to be confirmed.
This level can only be worked on during one trading day. Then we need to build a new bank level.
You can use the corresponding indicator to make working with bank levels easier. I’ll tell you about it in the next article.Fyodorov’s Inga05.11.2018