Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.
Support and resistance are two of the most widely used terms in forex trading, and we tend to use them loosely, assuming that it is always understood by all. There are however important distinctions that need to be made, primarily when dealing with different timeframes. The topic can be a bit challenging for forex trading beginners to fully grasp, so I hope this article will be useful in that regard. Also, not all low points in an uptrend can be accurately described as support, and conversely, not all highs may be called resistance points. An easy way to identify resistance and support is to draw a trendline from the highest high, or lowest low point that you can identify on a chart, making sure that the last point the line is attached to, comes just before the latest highest high or lowest low. The trendline will now project likely points for the market to bounce when tested.
It should be noted that what is just a minor high/low on a bigger timeframe could be major resistance or support on charts of a smaller timeframe.
I have used the charts below to illustrate the difference between lows/support, and highs/resistance:
Lows: In an uptrend, lows are formed after minor pullbacks in the trend. They do not necessarily reflect an important price level. There are usually many lows between the support levels.
Highs: In a downtrend, highs can be seen in between resistance points after minor pullbacks. This is the exact opposite of a low.
Support: This is a point where a major low has been made. Usually the market is reacting to an important psychological or technical level.
Resistance: This is the opposite of support.
Tip: Place a horizontal line at a suspected resistance or support area; zoom out in order to see as much of the chart history as possible. If price repeatedly tested the level where the lie is, with repeated rejection, then that area is likely to represent major resistance/support.
Tip: Once broken, a resistance/support point will reverse function. i.e. A close above a resistance level will have it turn into support.
Thanks for reading. Safe trading! 🙂
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