Support and resistance Forex: How To Trade And Find It

The concept of support and resistance Forex is very important for traders. Basically, Support and resistance Forex represents areas of price movement that are expected to be blocked or not. Let’s study the details.

Support is a falling price level that tends to slow down or reverse. That is, the price is more likely to “bounce” from this level than to break through it. However, if the price turns out to have passed this level, most likely the price will continue to fall until it finds another support level.

Resistance is the level of prices that are rising, tend to slow down or reverse. The price is more likely to bounce down from this level than to break through it. However, if the price turns out to break this level upwards, it will open the way for the price to continue rising until it finds another resistance level. Then, how to trade? Find out complete answers about trading in the Traders union article.

How to trade?

Support and resistance Forex allows traders to guide themselves through the market. By observing these levels on the chart, you can see the structure of the market and predict the continuation of the direction of price movement and their size.

The concept here is that these levels will most likely hinder the price movement and make it reverse. Thus, it is a common approach to open buy transactions at the support level and sell transactions at the resistance level. If you want to profit from trend trading, you should buy at the support level during an uptrend or sell at the resistance level during a downtrend. If you are not trading the trend, you can use the Support and resistance Forex levels as your entry point and close the position at the next support/resistance level.

In fact, support and resistance levels also give traders a clue where to close a position. So, if you have a short position opened and the price is approaching a support level, you might consider closing your trade. The same is true for long positions, the difference is that once you open a buy position, you need to take into account the resistance level.

Support and resistance can be observed in every timeframe. However, it should be noted that the larger the timeframe, the more important the support/resistance level is. In addition, even though what we mention here are levels, trading is still not an exact science, so you should consider support and resistance as areas. When you identify support and resistance, you need to enter a few pips near them. This is to assist you in making more accurate trades.

How to find Support and resistance Forex?

Support and resistance Forex comes in a variety of formats. The first is a diagonal trend line as we described earlier. Trend lines can connect price highs and limit the trend to the upside. In this case, the trend line is referred to as the resistance line. Trend lines can also be drawn from the lows of the chart and limit the price movement to the downside. Such trend lines are called support lines. Support and resistance lines can be drawn in an uptrend or downtrend. You need at least 2 highs and 2 lows to draw a trend line. You can find more information about trend lines here.

Please note, during an uptrend, the support line becomes very important because if the price breaks down, the trend will turn into a downtrend. On the other hand, during an uptrend, the resistance line becomes very important because a break to the top will allow the price to continue rising.

As the market is constantly moving, support and resistance lines and levels often switch places. As you can see in the image above, after the price drops below the support line, it starts acting as a resistance line.

Support and resistance Forex levels

Apart from that, there are also horizontal Support and resistance Forex levels. One of the easiest and most effective ways is to drag them through the previous highs and lows on the chart:

Another technique traders use to identify support and resistance levels is to use moving averages, Fibonacci levels, pivot points, etc.