Support and Resistance

Support and Resistance is one of the most widely used concepts in trading. Strangely enough, everyone seems to have their own idea on how you should measure support and resistance.

Support is determined as a price level at which market seems to having difficulty to go lower.

Resistance is a price level at which market seems to having difficulty to go higher.

Support can be thought of as a floor for the price while resistance can be thought of as the ceiling for the price. When the price breaks through a resistance, that level becomes the new support level.

The reverse is true when the price breaks through a support level, that level becomes the new resistance level.

The best use of support and resistance is during trend trading. If the trend is up, you want to go long at support and take profit at resistance. If the trend is down, you want to go short at resistance and take profit at support.

Support and resistance levels are sometimes not exact price levels. Many times, they will be a small range of prices. Once the price clearly breaks past that range of prices, support or resistance is to be considered broken.

Support and resistance should be used as reference points when looking at a forex chart and trying to make a decision. They can give you a good idea of where to put your stop loss or take profit orders.