Forex Support And Resistance – The Best Trading Strategy
Forex Support And Resistance levels are proven price areas where buyers and sellers find some form of equilibrium and generally a shift of power between buyers and sellers occur that creates the ‘price reversal’. Therefore Support and Resistance are the key turning points in the market. Price doesn’t move in straight lines as you are no doubt well aware of. Price swings up and down, creating new swing lows, swing highs or re-tests existing ones. The more often price does this stop and reverse action at a specific level, the ‘stronger’ or more’ significant’ that particular S/R level becomes.
A quick search of the forums and it didn’t take me long to find traders posting up charts littered with Forex Support and Resistance lines that are way overdone. Instead of keeping things straight forward and simple, this trader has gone overboard and created an environment that is impractical and just down right too difficult to trade in. There is absolutely no need for this and is extreme overkill. Support and resistance make up the major boundaries of ranging markets, when a market is range bound the only levels you really need to have marked out is the upper resistance ceiling and the lower support floor of the range.
Nearly every single technical trading system will rely on you the trader having the ability to correctly Draw Support And Resistance levels on your chart. Mapping out support and resistance is really the most important core skill any serious traders will need to have a good grasp on. If you can’t draw your support and resistance then your trading as a whole will implode on itself. Support And Resistance is a concept that the market will experience opposition to one degree or another in a certain area. That means that the market will tend to struggle at areas of Support and Resistance and often times bounce.
The ability to draw support and resistance correctly is learned over time and patience, so don’t give up. If you’ve got a chart that’s loaded up with so many lines that you don’t even know what you’re looking at anymore, then you’re doing it wrong. Acquiring the skill of marking out support and resistance is super important for any trader because it’s the backbone of any trading system you come across.
Support and resistance are specific price areas or price levels which either support prices on declines in up trends or which resist prices on rallies in down trends. In an uptrend, short term and day traders will attempt to buy at support or at levels of support. In a down trend, short term and day traders will attempt to sell at resistance levels or in resistance areas. If support and resistance levels cannot be determined, then you cannot define concise levels in which to establish entry or exit positions in your specific trade. It is of utmost importance for traders to develop effective strategies and methodologies for calculating support and resistance levels.
Support And Resistance levels are used by investors to determine how far they believe a currency pair will move. This also tells them at what points the price action may turn around and start moving in the opposite direction. But sometimes, the markets change direction due to a fundamental factor. The market change of direction is strong enough to cause a currency pair to break through a previously established support and resistance level.