How To Draw Support & Resistance Levels

Support and resistance levels are used to identify key levels where the trend in price has a greater probability of halting and possibly changing direction. As the market usually goes up and down it is correct to say the Resistance becomes support and support becomes resistance.

Support indicates an area that buyers are stepping up in the market to support the price of any Forex instrument. For example, if a forex pair keeps to a certain price and it bounces off that figure, it means that there is support at the price. These support levels are created by successful buyers so this price level is below the current market price, at which buying interest should be able to overcome selling pressure and prevent the price from moving any lower.

Resistance is the opposite of Support and reveals an area where sellers are entering and dumping supply into the market. This causes the price to fail from going any higher. Resistance is a price level above the current market price, at which selling pressure should be strong enough to overcome buying pressure and thus keep the price from rising

One of two things can happen when prices approach’s a support or resistance level. The first is, it can act as a reversal point, in other words, when prices drop to a support level, it will turn and go back up.

The other possibility is that support & resistance levels reverse roles once they are penetrated. For example, when the market price falls below a support level, that former support level will then become a resistance level when the market later trades back up to that level.

On each time frame, there are support and resistance levels that can be used to help a trader enter, exit or manage trades. The time frames have significant relevance to support and resistance levels. The bigger the time frame, the more important the Support & Resistance levels are. Support & Resistance on a weekly chart is more significant than a daily chart, which will be more significant than an intraday chart.

Turning points are defined as the starting price of a price swing till the ending price of the price swing. These price points are where the battles between the buyers and sellers occur and the winners will move the market in a certain direction. A significant turning point is a point that has been tested multiple times, especially if the price point had been resistance and later became support.



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