Various Forex Support & Resistance
Support and resistance are popular terms in the world of trading. That said, trading without determining support and resistance will cause losses. But is that right? Actually what is support and resistance? Well, this time we will learn to recognize support and resistance methods for forex trading.
Understanding Support and Resistance
Support and resistance are critical levels used by market participants in making decisions. These levels are used to determine whether prices will continue or reverse direction. When combined with candlestick forms it is believed to be able to determine the next movement.
Economic support can be interpreted as a level where supply starts to decrease and demand increases so that if that happens, the price will rise at that level. In principle, if the market price breaks the support level, then the market price is expected to continue its decline until the next support level. But if the market price is not able to penetrate this level then the market price will reverse direction. The broken support level can be a resistance level and hold the market price up.
Economic resistance can be interpreted as a level where the supply is too much and demand has begun to decrease so that the market price will drop at that level. If the market price manages to rise and breaks the resistance level, then the market price is expected to continue rising up to the next resistance level. The broken resistance level will be a support and can hold the market down past that level.
To be able to recognize support and resistance, like it or not you have to learn to observe forex charts. Slowly, no need to rush. You can do it.
Determine Support and Resistance
After understanding the meaning of support and resistance, now is the time for you to determine the support and resistance. Do you know there are many ways to determine support and resistance? there are several ways to determine support and resistance. Let’s discuss it one by one.
Top or Bottom Point
This method is a simple way to determine support resistance, by looking at historical data where prices are stuck. For more details, you can just look at it from the picture.
The essence of this method is that you just have to see where the price is a lot of hold. The bigger the timeframe used, the more valid the support and resistance will be. Oh yes, the chart above uses candlestick charts. If you want to learn about candlesticks that are popular in forex , you can click here .
Trendline can act as support and resistance. To be able to draw a trendline well, of course you must recognize the trend first. The trick is to connect at least two points of the valley if in an uptrend, while in a downtrend, connect at least two vertices. If the price approaches the trendline line then it can open the chance for the area to become a resistance or support area. To clarify, you can just look at it from the picture.
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If you are already proficient at using meta traders, Fibonacci retracement tools may be terms that are not familiar to you. These tools are often used by traders to analyze. But did you know that Fibonacci retracement can act as support and resistance? Fibonacci has levels that are commonly used, namely levels of 0.0%, 23.6%, 38.2%, 50.0%, 61.8%, 76.4% and 100.0%. These levels are often used as a reference to determine support and resistance areas. By using this Fibonacci, you can take several popular levels which are commonly used as a reference to determine support and resistance, namely 38.2%, 50.0% and 61.8%.allegedly at these levels often appear buy or sell signals which are quite high accuracy. To clarify, you see the picture below:
If you are still curious about this Fibonacci retracement, please visit our forex learning page here .
What is a round number? Round number is a level that is a round number and easy to remember. An example is USD / JPY with a psychological level of 100, EUR / USD with a level of 1.30000 or 1.40000 or AUD / USD at the psychological figure of 1.00000, etc. In forex trading, round numbers are psychological levels that can act as support and resistance areas.
Pivot point is a branch of technical analysis which is also a way of calculating to determine support and resistance areas. Pivot points are not an indicator, but can be said to be a branch of technical analysis.Traders usually mention pivot points as objective support & resistance.
The Pivot calculation basis is obtained from the sum of the high, low and close prices then divide by 3
Pivot = (H + L + C): 3
But there are also those who add the price of the high, low, and close periods before, open the current period and divide by 4
Pivot = (O1 + H + L + C): 4
Another variation is by adding weight that is considered important, for example by emphasizing more on market closure
Pivot = (H + L + C +): 4
The use of pivot points is usually together with the use of layered support and resistance up to several times. To determine the support and resistance levels can use the following formulas:
- Resistance 1 = (2 x Pivot point) – L
- Resistance 2 = Pivot point + (H – L)
- Support 1 = (2 x Pivot point) – H
- Support 2 = Pivot point – (H – L)
The use of pivot points is the same as the use of support and resistance in general. When the market price approaches support, the price will likely turn back upwards. But if, the market price breaks through, then bearish pressure will continue towards the next support and vice versa.
Moving averages can also function as support and resistance. Usually moving averages are often called dynamic support and resistance (dynamic support and resistance) . So named because it moves according to price movements. During an uptrend, Moving averages function as support. Conversely, during a downtrend, Moving averages function as resistance.
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For 6 ways that can be used as a reference as support and resistance.Then which support and resistance do you like?
Article by: Garry Adrian