When you draw a line connecting the lowest price points, that is your support line. To draw a resistance line, you would connect the highest price points. This is only a very basic idea to provide a picture; there is more to determining which bottom points and which top points need to be considered.
Since support is shown on a chart as a line connecting specific low points, it is easy to see how it tends to function as a floor and prevents the price from going lower. More often than not, prices will tend to bounce off this level rather than go through it. When the price does break the support level, it generally continues dropping until is reaches another support level.
A resistance level is the opposite of a support level. This is where the price tends to find resistance as it pushes upward. And as with support, the price is more likely to bounce off this level rather than break through it. However, once the price has passed this level, even by a small amount, it is likely that it will continue rising until it finds another resistance level.
If a price breaks past a support level, that support level often becomes a new resistance level. The opposite is true as well, if price breaks thru a resistance level, it will often find support at that level in the future.
Many technical traders will use the support and resistance levels they’ve identified to choose strategic entry/exit prices because these areas often represent the prices that are the most influential to a currency pair’s direction.
Initially, the concepts and explanations behind identifying support and resistance levels appear easy. But as the new trader will soon discover, support and resistance can come in a variety of forms and is more difficult to master than what first meets the eye.
Hundreds of price patterns can be identified using only support and resistance, and they can be found in any time frame charts. Entire trading strategies can be based solely on support and resistance levels. It is very possible for a trader to make a good living trading forex once these concepts are mastered. So if you’re looking to get up and running as quickly as possible, we urge you to start your forex trading education by mastering the concepts of support and resistance.
ForexGen now has a trading new client called MultiTerminal. The MultiTerminal is intended for simultaneous management of multiple accounts, for which is mostly helpful for those whom manage investors' accounts and for traders working with many accounts simultaneously.
No comments:
Post a Comment