Supports and resistances in the market

When a trader develops trade strategies and market analysis can be of great help in determining the exact entrance to and exit from the market support lines и resistance.

The line, which the price cannot break down, is called support line (Support - sup)and the line, which the price cannot break upwards, is called Resistance line (res). The channel formed as a result of drawing parallel lines (sup, res) is called the optimal range of trading changes, if it slopes upwards we can talk about an upward trend, if it slopes downwards the trend will be downward.

Support and resistance levels are very important in technical analysis of the currency market. Here are the basic rules to consider when analyzing the market with support or resistance:

1. The more price range in the region support or resistance, the stronger the area is. The price consolidation (stabilization) area with a spread of 1% will give very little support or resistance. The area of prices with a spread of 3-4% gives average support or resistance. But the area of price consolidation with a spread starting from 7% is like a "fence" for prices, it can stop and not let any trend go further, even a very strong one.

2. The more transaction volume in the support or resistance area, the stronger the area is. High volume in this area indicates that many players are involved in the trading process and the area of support or resistance is strong. Small volume indicates that there are few players and support or resistance is weak.

3. As soon as the price approaches support or resistance, you should give an instruction: "sell below the existing price level" (if you opened a buy position), or give an instruction: "close a sell position above the existing price level". This will protect you from taking large losses. If the trend is strong, you won't need these precautions. And if the trend is weak, then prices will "bounce" off support or resistance and you'll save big profits.

4. Analysis The price of the support or resistance lines is more accurate in the long term than in the short term. So, if prices on the weekly chart are still moving freely, and on the daily chart have already touched support or resistance, then we focus on the weekly chart.

5.  Breaking through support or resistance levels is not in itself a buy or sell signal - it is necessary that other technical analysis tools also provide a buy or sell signal. In order to trade successfully on the e, technical analysis tools must be used in combination.

A trader trading the market must always remember that the market spends more time in a price corridor than in a trend. Most breakouts over support or resistance lines are false and are essentially traps, pulling traders into a seemingly profitable trade on a breakout, and then often, very insidiously, prices instantly go back up, fixing a loss trader. The analysis of support and resistance lines helps the trader not to be drawn into a false breakout, and thus have a steady profit in trading.