Independent Study Support and Resistance
| Support and Resistance |
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Now that you know how your chart is made, let’s talk about the most basic of technical analysis there is, Support and Resistance. Because of its ease of use, accuracy and trainability, support and resistance should be the first analysis tool you learn to use. So, what is Support ad what is resistance? Well both are levels of price that have difficulty being broken. The difference is that Support is a price level that trades can’t seem to get through on the bottom side and Resistance is a price that traders can’t seem to break on the top side. Take a look at the picture below. In this example, traders, specifically buyers, tried to take price over the 1.3000 mark on 5 different occasions over several months. They were unable to do so and soon give up.
In this example traders are currently trying to get the USDCHF to fall below the 1.0600 mark and stay but are not having much luck. How long can they hold on?
These areas of support and resistance offer trading opportunities to the well trained individual, who has back tested strategies that take advantage of these areas. Knowing where, when, and why to enter buy or sell positions makes all the difference. The best way to get started is to start finding them on your own, using FXTrek or just a long term historical chart. Support and resistance has many faces and interpretations. Over the next several lessons we will be going into depth on many of these. |
