Forex Support and Resistance Levels are one of the most important things to grasp when you first start trading on the Forex Platform. In fact, grasping this concept could result in untold gains for yourself monetary wise as it will enable you to start to plan your own financial strategies. Sadly there isn’t enough space here to cover Forex Support and Resistance Levels in depth, but I am more than happy to give you a brief overview.
Let’s start simply with a brief definition of what the definition actually is. To put it as simply as possible, Forex Resistance levels are when the market has moved up to the highest possible point and then starts to ‘fall back’, the highest possible point is known as resistance. As you can probably guess, the lowest possible point that it reaches is known as the Forex Support levels.
So how do we measure the Forex Support and Resistance Levels, and ultimately use them for trading? Well, we do it in the way that all Forex traders know, with a graph and a pen. There really is no better way for it! Your goal here is to help establish a trend, if you can establish a trend, then potentially it is much safer to trade on the market, although of course, it isn’t completely safe, there is still an element of risk when you trade Forex.
Drawing trend lines for working on Forex Support and Resistance Levels is incredibly easy. Just connect two major tops or two major bottoms and connect them up. That is all there is to it! There could be a number of trends that form here. This includes uptrends, down trends and sideways trends. From your knowledge of Forex Trading you should already know how to deal with both of these. As with all trend lines, the steeper it is, the less reliable it will become.
The next stage is to create a ‘channel’ with our trends. Again, this is delightfully easy. You will need to draw a line which is parallel to your other line, it needs to be at the same angle. You then need to move it so it fits the most recent peak or valley on the chart (depending on whether you are dealing with a uptrend or downtrend.
So when is the best time to buy and sell? Well, we can use the Forex Support and Forex Resistance levels to determine this. Ideally, when the prices hit the bottom trend line that is the best time to purchase currency, which it hits the top line that is the best time to sell. Remember, you would need to test the lines numerous times before you jump in, you should be able to spot trends fairly easily.
Hopefully this has given you a bit of information required for learning about Forex Support and Forex Resistance. If you really want to be profitable whilst trading Forex then it would be in your interests to research both of these concepts in a lot more depth, honestly, you will be happy that you did. Good Luck on the exchange!