Using Support and Resistance in Forex

Tuesday, September 9, 2008
Support and resistance is the one of the most popular and widely used methods of technical analysis in Forex. It’s simple, easy to understand and doesn’t even require any additional analytical tools except the bare chart of the currency pair. Support and resistance levels form when the price action creates the distinct peaks and plateaus on the chart. Support level acts as a barrier for the rate that falls, while the resistance is the level that prevents rate from growing farther. Buying when the resistance is broken and selling when the support level is broken is an easy Forex technique that made thousands of traders rich. If you plan to trade using support and resistance, don’t forget these important facts:
  1. When the support level is broken it becomes a resistance level, the vice versa is also correct.
  2. Breaking the support and resistance levels isn’t an exact math. False breakouts are possible.
  3. Real breakouts are usually marked with a bar closed below/above the support/resistance level.
  4. Check your charts on the different (larger) timeframes. Some important support and resistance levels can only be seen on the long-term charts.
  5. If the rate bounces off the support or resistance that level becomes stronger. The stronger support and resistance level is the more profit can be gained when it’s broken.
Concluding all that was said above I should also warn you that using support and resistance in your daily trading will become profitable over the time as this method requires a lot of real experience and becomes more powerful with each trading success or failure.