Best forex brokers 2017 / Support and Resistance lines in forex: Learn how it works

Support and Resistance lines in forex: Learn how it works

The world of Forex trading exerts on many traders an appeal from, because the Foreign exchange trading carries a number of advantages and is the comparatively low use even for beginners who have not yet boast a lot of experience. However, no one should unprepared begin forex trading and initially, the learning forex trading and in this context, with the technical analysis to address.

The concept of support and resistance belongs here to the simplest and most effective technical chart instruments. Support or resistance are easy to identify and can without further evidence of market developments warrant the opening and closing positions.

Support and Resistance in Forex: The Facts

  • Who wants successfully with foreign exchange trading, should be well informed about the technical market analysis
  • Support and resistance levels are a branch of technical market analysis
  • This is a kind of barrier to the bounce of the course and reverses again
  • There are correlations between support, resistance and volume

1.) What advantages and disadvantages can be found in Forex trading?

What advantages and disadvantages can be found in Forex trading?

When foreign exchange market is the largest and most liquid market in the world. But from this fact, there are some of the advantages that brings the forex trading with them. Due to the high liquidity numerous trade opportunities and the trader can implement their individual trading strategies without restrictions result. Furthermore, is traded in forex trading with leverage and that means that with relatively small stakes positions are moved, which are higher by a multiple.Due to this fact disproportionately high potential profits that are unlimited in theory. Additional benefits include the fact that the currency trading both rising and falling prices may be speculated what additional trading opportunities result. Even traders are not tied when trading currency pairs on the closing times of a stock exchange and the access to markets is continuously possible from Sunday evening to Friday evening. But the forex trading not only offers advantages but also poses great risks. The lever, which in the best case can provide huge profits, may also be responsible for high losses. Due to the high liquidity great losses can be realized within a short time. So the technical market analysis should be given great importance and a trade decision should always be based on sound analysis and evidence and are not taken from the gut.

Conclusion: The trading of currency pairs can bring both advantages and disadvantages. The benefits include, for example, the high level of liquidity, the comparatively high stakes, the through Forex trading hours and the potentially unlimited profits. Risks include the fact that also can very quickly arise very high losses.

2.) The characteristics of the support resistance strategy

With supports and resistances in the Forex trading is a kind of barriers that using a forex charting software can be determined. These barriers «bounces» off the price of a single value, and they can be used to determine in advance where the price development is likely to be reversed. Particularly obvious are horizontal support or resistance. Such a resistance occurs when the market at least twice in a certain level stops its upward motion and initiates a correction or consolidation.Supports occur mirrored on in downward markets.

The more frequently the market is at a resistor already failed, the greater is the significance of resistance. It also follows: The significance of an outbreak increases with the significance of the resistor. Has breached a resistance it acts thereafter as support. Resistors (and mirror image backups) can be traded procyclical and countercyclical. If the market moves to a significant resistance to be opened near the previous reversal points a short position, may be participating in a short-term correction with. Then a stop loss is short to place above the resistance. Can be speculated on a breakthrough by the resistance also by a stop buy order is placed just above the resistance levels. Again, a Stop Loss is recommended in terms of «Bull Fallen».

Conclusion: the market approaches a resistance to traders not set: The two aforementioned positions can be placed in parallel in the market. With support and resistance is a kind of barrier, where the price of an Underlying bounces and comes back. Support and resistance levels can be traded in both cyclic and counter-cyclical and more often a support or resistance level has been confirmed, the more significant it is.

3.) Relationships between support, resistance & volume

Relationships between support, resistance & volume

In forex trading, the basic rule is that significant outbreaks are accompanied by an increase in volume. In Forex trading, no reliable sales data is available, because no central exchange exists and the sales of individual brokers and networks may be representative in any way. Trader but could manage this at least partially with data on exchange-traded derivatives to the corresponding currency pair. Resistance and Support occur not only as a horizontal «pads» on.Also trendlines, Fibonacci retracements and even individual highs and lows have the properties of Support & Resistance. As always in technical analysis: talk The more evidence for a specific market development, the more likely this occurs also. Generally should traders in trading Forex consider whenever possible combined support, resistance, and other chart and market technical concepts, even if resistors are already meaningful in itself. One of the basic rules in the support- and resistance strategy is that significant breakouts from the rise accompanied the volume. However, no reliable data can be collected in the field of Forex trading in this regard, since in this case there is no central exchange on which revenues can be collected.

Conclusion: In general, the more evidence for a specific price development talk, the more likely this development also occurs and for this reason, in addition to the support and resistance lines more concepts like Forex Fibonacci Trading  or individual highs and lows for the analysis included will.

4.) Resistance and the role of a psychology

Critics of technical analysis like impute this «tea leaves» or qualify it as a «self-fulfilling prophecy» from. He first allegation can be refuted easily because resistances and supports take empirically demonstrable influence on the price development or are barriers in the market, of which level can be taken from price forecasts with a significantly increased likelihood. The second allegation is without substance, because actually put many traders stop orders near resistors. But in forex trading this is likely or in stores to play only a minor role with liquid securities, if not yet added a psychological component, which generally only the media very closely accompanied quote marks (z. B. time highs) can be assumed. More important is the function than buying rate of many market participants: At the level of resistance, many investors achieve their cost price back, without resulting unrealized loss to reduce positions after an otherwise unsuccessful course.

Conclusion: Although many critics of technical analysis these times also dismissed as «reading coffee grounds», this approach does not have much to do with gambling, but is based on extensive analysis and comprehensive market observation. The psychology plays a role, for example when it comes to indicators such as all-time highs.

5.) Conclusion: Support and Resistance in Forex — Not hard to understand

The support or resistance submitted to the technical market analysis in Forex practical and effective means is to analyze a price development and to determine. Resistances and supports serve as barriers, where the rate is above «bounced» and turned back again. They can be traded in both cyclic and counter-cyclical. The more frequently a resistor or a support has previously been confirmed, the more significant this is.

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