Forex Wicks Or Nah?

Forex Wicks Or Nah

Let’s talk about wicks in Forex trading, many things are believed about where to draw trendlines and support or resistance lines.

Usually, the question is, “Do I draw the trendline along the wicks of the swing points or just along the bodies of the candles and ignore the wicks?”

You will get different answers from different traders about what to do, and that is it can be so difficult for beginners to know what is right and what is wrong. In this article, we will break down the answer for you.

The Answer

Yes, all your resistance or support lines must factor in the wicks on a Forex chart. In forex trading, you want all the information you can get your hands on.

Wicks give you extra information about price, and if you choose to ignore that information, your punishment will be losing to those traders that use that information.

There’s a reason Candlestick charts are so popular. It’s not just for decoration. To read more on different chart types and what a wick actually is, click here.

It is not a question of WHICH wicks to focus on. All of them are important. I mention this because some traders believe that you should ignore wicks caused by news events.

This is also not going to benefit you. The market is random, yes, but everything has a reason for happening the way it does. Even a flash crash has a reason happening the way it happens to the extent that they happen.

Trendlines or Support and Resistance

I’m not such a fan of trendlines myself because I’ve never really found success with them, but I know there are some traders who could use them successfully.

Being the person I am, I don’t see a problem with using both, but I prefer purely horizontal support and resistance lines. “Previous resistance becomes future support” is the saying I see playing out every day in the markets.

Trendlines and touches, breaks and retests, not so much. In their defense, I’m not really looking for them.

Although, from what I’ve read in books about trendlines, the general feeling is that you should always draw your trendlines by connecting the wicks of your swing points.

Drawing your trendlines this way will assure you that the trend is actually over.

With Support and Resistance, your best bet is plotting across the wicks.

Plotting your horizontal support and resistance on candle bodies will always end in your levels getting violated because the level doesn’t factor in all the price information.

Conclusion

Wicks in forex trading are an invaluable tool that you can use to forecast horizontal zones or levels where price is likely to react again with decent accuracy.

Trendlines are also more accurate when you draw them along the wicks of the swing points. I don’t doubt that there are traders who ignore wicks in their trading, but wicks are also part of the story on the chart.

Don’t bet the farm.

Don’t lose your shirt.

Cut the L.

Keep the W.

Happy Trading.

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Lunga Shabangu

Lunga Shabangu

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