August 4, 2020

What is Support and Resistance in Forex?

Support and resistance ranges are essential things to understand for most traders. These levels enable one to choose where to do an arrangement. Support amounts are usually considered degrees that amounts couldn’t go under easily. And just like the opposite, the resistance levels are levels that amounts can’t move over.

While doing a technical investigation, it’s almost compulsory to seek resistance and support levels before launching a deal. For instance, let’s look at those levels in a graph beneath.

As you can observe in the EURUSD graph, there’s a solid support zone in 1.1725-1.1730. Price has analyzed these levels a lot more than three times and also couldn’t manage to broke it. However, after many attempts with the help of some fundamental factors, EURUSD broke this support and fell sharply after. This is why you should always be more careful when amounts near support/resistance levels. Because sometimes that is a fake breakout and amounts can go high again after testing support levels beneath.

Sometimes after a breakout, support levels will become a resistance and resistance levels iscome a new support level. This situation is called Support and Resistance reversal. In the GBPUSD chart beneath, you can see that after the support level is broken it worked as a resistance level.

Also, psychological levels can work as support and resistance. For example, let’s assume that the EURUSD exchange rate is 1.1400. In this situation, levels like 1.1450, 1.1500 and 1.1550 is considered as resistance levels.

Analyzing support and resistance levels will help traders to identify trends or trend reversals. Also, after executing an order, traders can set take profit or stop loss levels by looking at these levels.