Support and Resistance in Forex

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Support and Resistance in Forex

Support and Resistance is a price limit that is used as a benchmark for many traders when it will determine whether the next price trend will be more bearish or bullish and or also to determine the range of price movements, namely the upper and lower limits. This is in accordance with the character of price movements that always go up and down like a roller coaster, sometimes above and sometimes below.
When the price is able to go through the support line it can be predicted that the price will form a new support and resistance line and it is said that the price has broken down so that it can be predicted that the trend is bearish if the breakdown continues.
Likewise vice versa when the price has been able to go through the resistance line then it can be predicted that the price will form a new support and resistance line and it is said that the price has experienced a breakout so that it can be predicted that the trend is bullish if the breakout continues.
For example, when the price has touched Resistance 1 and is not strong enough to break it, the price will bounce back to touch Support 1 and because it is not strong enough to penetrate it, the price will bounce back upwards. This price movement will continue to occur like that until market players believe that they can move the market price to break the Resistance 1 line and the breakout forms a new Support 2 and Resistance 2 line.

Please note that what determines the support and resistance line limits is that each trader itself is based on instinct or market analysis results. And the more right you determine the upper and lower limits, the greater the chances of getting profit and reducing losses when trading forex.

Support and Candlestick

And also keep in mind that the support and resistance values ​​are not a fixed number but rather as an approximate value (zone or area). One example is the support on the candlestick in the picture above. When you find that the support value has been passed but it only tests the support value and bounces again. When determining the support and resisitance in the candlestick, testing its value can be indicated by a shadow candlestick as shown above.

How Do You Know That Support and Resistance Have Been Passed

It is difficult to answer this question because there are no definite answers like how. But the correct opinion is that when the support and resistance values ​​are really passed. Ok let’s see an example of support at the 1.4700 level that has been passed and is there really a breakdown?

False Breakdown

After seeing the example above it turns out that the support level of 1.4700 has been exceeded but after that it bounces back to the support level far from expectations. And if you make a decision to open Sell when the breakdown as above, it is certain that you will suffer losses, especially without implementing risk management.

After seeing the false breakdown above, you can conclude that support and resistance are more as zones or regions compared to an exact value.

One of the right ways to help you find a zone or area is to use a line chart instead of using a candlestick chart. Because a line chart consists only of closing prices and it makes it easy for you to determine support and resistance zones or areas compared to using candlesticks which consist of opening, closing, lowest and highest prices that can make you fooled.

Support and Resistance With Line Chart

When you use candlestick charts when determining support and resistance you will often be fooled by price movements in the form of highs and lows that are formed and touched or through support and resistance due to a momentary market reaction and different when you use line charts that only display closing price.

Conclusion About Support and Resistance

  •  When the price is able to pass a resistance then the resistance level will be a new support level
  •  The more often the price tests the resistance and support levels, the stronger the zone or the support and resistance area
  •  When the support and resistance levels are exceeded then the strength of the next trend depends on how strong the support and resistance levels have been held and formed.

To be able to understand and use support and resistance levels as a powerful weapon of forex trading, what is needed is a lot of practice, analysis, and continuing to practice again.

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