Before trading forex you should recognize support and resistance

Before trading forex you should recognize support and resistance

Once told about a friend named George who was a watch forex trader at a mall in New York. George told when he heard the issue of the weakening of the USD exchange rate, he swiftly made a purchase of a large number of watches so that later he could sell it at a high price. George sells watches at lower prices with other forex traders. This makes his watch merchandise sell well. Seeing that fact, George began to increase the selling price of his watch little by little.

Another story tells a friend who runs a bakery business in one of the famous malls in New York. When his business was first opened, he made a promotion by selling below average bread in general. This causes an increase in demand for the bread. Because of the reduced demand for bread production, the friend inevitably lowered the price of bread so that it could still cover production costs.

trading forex

After reading the two stories above, is there a correlation between the two stories? Of course there are. Are you aware that they are actually doing forex trading activities? Buy items when cheap and sell them at high prices.

In forex trading we also sometimes experience things like in the story above. One of the terms we usually listen to in the field of forex trading is support and resistance.

1. Support

Support is a level that can stop the price movement down. At that time, demand was higher than offers. Or in other words, it can be said that there are more buyers than sellers. The effect is that prices will stop going down and move up again. The logic is this, if the price is cheap, of course there will be many people who buy the item.

2. Resistance

Resistance is a level that can stop price movements when rising. At that time, bidding was higher than demand. In other words, more sellers than buyers. The effect, the price will stop going up and will move down.

The most important thing in forex trading is that we must be observant in paying attention to where the support and resistance levels are. We buy at a low price (near support) and we sell at a high price (near resistance).


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