Introduction Forex Support and Resistance
Support and Resistance lines are often confusing if with trend lines. However, the support and resistance lines with the horizontal line are drawn below the low (low) and above the high (high) level. They (support and resistance) show where when the price of the previous rally rally touched the resistance then the price will be pushed down again. Then when the price drops before touching support then it will push the price back up. These are two important levels in terms of trend identification because the uptrend will tend to break the previous resistance level to create a higher high while the downtrend will break the previous support level to make the lower low position.
If the support line below the recent minor low is broken (break) in the ascending trend, this indicates that the uptrend is weakening and may reverse immediately. Similarly, when a recent resistance line is broken within a downtrend, this indicates that the downtrend is weakening and that a trend reversal may occur. If the support or resistance is violated, it often switches into a line of resistance or support for future price movements.
To be able to know where the level to draw trend line takes a little experience but it will be easier if you can identify small peaks and small troughs. Generally small peaks form when the bar or candlestick height is higher than the height of the bar or candlestick on both sides.
Support and resistance lines can also be identified in crowded areas of bars or candlesticks where prices are still “struggling” to close higher or lower. This area can be recognized by the length of price that is fought on the level and or the amount of volume traded at that level.
Finally, the support and resistance lines on the chart with the timeframe are greater than the support and resistance lines on the graph with a short timeframe. Thus, the support and resistance lines on the weekly chart are more significant than the support and resistance lines on the daily chart. And the support and resistance lines on the daily chart are more significant than the support and resistance lines on the hourly chart. However, the support line and the old resistance line tend to lose some but not all of their significance with the passage of time.