Support and Resistance in Forex Trading
You should learn technical analysis. It will give you the edge as a currency trader. It will develop your confidence in your ability and capacity to predict what will happen in the markets in the future. If you want to understand forex trading than you should learn the concept of support and resistance.Discover the Freedom Forex Formula that made $34 million from scratch using a simple forex method. Watch this Freedom Forex Formula video that shows a FREE FX Method that makes 7,913 pips from just one market move and download the special manuscript FREE that explains the forex method in step by step detail. Download these Forex Scalping Cheatsheets plus the 10X Scalping System FREE. Master these highly profitable Candlestick Patterns with this 82 pge PDF FREE Candlestick Guide!
Support is the price level that a currency pair touches but has trouble breaking through to the downside. Support is also called the floor of the currency pair price movement.
Resistance is the price level that a currency pair has trouble breaking through to the upside. Resistance level is also known as the ceiling of the currency pair price movement.
A simple explanation is that majority of the forex traders think the support level as the best price available to them and considers it an excellent opportunity to buy once price reaches the support level.
Similarly, at resistance, majority of the currency traders think that currency pair is not favorably priced and has become overpriced. So they consider it as an excellent opportunity to short the pair.
Now, what happens at the support level is that as traders begin to sell the currency pair and take profit, the price of the currency pair drops down. As the price starts to fall, other traders who are interested in buying the currency pair keep on watching how far it will go down.
When there are more buyers than sellers in the market, the price of the currency pair starts to rebound and rise. It rises till the resistance level when majority decide that the currency pair is now over priced and start selling.
Infact the concept of support and resistance is central to trading any market like stocks, commodities, futures, options, ETFs, bonds and whatever. You just need to understand that support is the level where buyers are willing to step in and resistance is the level where sellers jump into the market!
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