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Support & Resistance |
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Support and resistance are the foundation of all chart formations.
Identification of key support and resistance levels is an essential ingredient to
successful and profitable trading.
Think of currency prices as the result of a head-to-head battle between a bull (the
buyer) and a bear (the seller).
The bulls push prices higher and the bears push prices lower.
The direction prices actually move reveals who is winning the battle. Support is
commonly defined as "a price level or area at which the demand for currency traders
will likely overwhelm the existing supply and halt the current decline."
Resistance is defined as "a price level or area at which currency traders will likely
overwhelm the existing demand and halt the current advance." |
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Trading Strategy on tests of Resistance |
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One of the most-common and best-known trading strategies is this: "Buy at the support
level and sell at the resistance level."
As you can see from the chart below, the ability to identify a level of support
can also coincide with a good buying opportunity Other Indicators In technical analysis;
many indicators have been developed for to identify barriers to future price action.
These indicators seem complicated at first and it often takes practice and experience
to use them effectively.
Regardless of an indicator's complexity, however, the interpretation of the identified
barrier should be consistent to those achieved through simpler methods. |
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