Trading Forex support and resistance

Trading Forex support and resistance

Support and resistance has long been a staple in Forex trade indicators. Support and resistance is a simple concept that has its roots in the theory of supply and demand. When looking at the chart you will see that price action appears to be random, but with the addition of support and resistance theory of the equation you will see that price movements are not always random. I first noticed this before I started trading Forex. I used to watch the stock code on television and over time I noticed that at certain price levels of the Dow Jones Industrial Average would seem to have difficulty breaking throughsome price levels. It was more obvious when the price tried to move through the round numbers.

As prices go up comes a time when traders think the price is to high, and buyers will slow down. This is called resistance. Generally, the cost area to be called resistance will have to have 3 or more visits on or near the same price. The same rules apply for support, but this term describes the failure of prices to continue to go down. Once the price goes down to the point of prices is seen as a good bargain. In the same way a store puts things on sale. When the selling price of power are usually more buyers want to buy. The markets work the same way. The more hits the price level of the stronger resistance that support or believe it is.

Many times there is no good explanation for the support or resistance level than other people believe in it. Often this is enough to cause the Forex market to stall or reverse. Perception is often the motivation behind the Forex market price movements. I saw prices move sharply amid rumors. On the other hand I have seen very little movement in prices after that I think is an important announcement.