Two of the most important things to learn in technical analysis are support and resistance. These two things give you an idea of where price is going. Prices tend to hang a certain high and stay at a certain low. They also break out of these areas as well as this provides the best forex trading opportunities.
The action of price is to move up, down or sideways. Regardless of the way prices are moving, one begins to notice that there are certain forex signals and price tends to bounce between two areas, a top level and a bottom level. The bottom level is known as support and the top-level is called resistance.
Support is defined as a price level where there are more buyers buying to overcome sellers selling, so that the buyers can keep price from going down further.
Resistance is where there are sellers and enough selling pressure to overcome buyers and buying pressure, so the sellers are able to prevent the price of the currency from going up.
The best way to understand this is to get visuals aids. It is impossible to do this in your head. Study and understand it and act on forex trading tips. You can mark off trendlines and see the support and resistance levels.
This will take some work and effort to understand and apply. The action of price and the levels will determine what kind of trade you will make. Also, you may be able to predict where price is going– up or down. There are other things like forex arbitrage that are good to know as well.
Support and resistance are the prices that buyers and sellers tend to respect in the market. There is a lot more to the subject than this article, so gather as much information as you can on the subject.
It will take time to understand this information. It is imperative that you do or you will lose a lot of money. Make sure that you stack the deck in your favor.
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