PRICE SUPPORT AND RESISTANCE
Support and resistance (S&R) are terms used by technical traders to refer to currency pair price levels at (or near) which price has reversed its direction in the past, or where price is likely to reverse due to psychological reasons.
In our FX Bootcamp sessions, we may suggest at times that a rising currency pair will likely find resistance in a certain price zone. This is a predicted near-term high for price—a ceiling—where buying pressure will likely encounter a larger degree of selling resistance. If such a resistance zone holds, then there are many sellers at that particular price, and they may overpower the buyers (who may turn into sellers themselves). Price will dip as long as this selling pressure is present.
Likewise, we also suggest at certain times that a falling currency pair will likely find support in a certain price zone. A support area represents a “floor” of sorts where traders expect the buyers to support or hold off the market’s selling pressure. It is a predicted near-term low, and price will rise as long as this buying pressure is present.
Why Is Price S&R Important?
Support and resistance levels are a very powerful part of your forex trading arsenal, applicable to both trending and range-bound markets.
In a range-bound market, support and resistance define the lower and upper bounds of price movement. In such a market, we may consider trading opportunities of selling at resistance and buying at support.
When price approaches ...