Online forex articles
Forex Trading Support and Resistance Levels
If you are going to invest in online forex currency trading, you will be reading a great deal of Forex charts. Forex Support and resistance levels are important concepts that are quite commonly used when trading online.
Imagine a standard online Forex bar chart that details the price movements across a time period. You will notice that the chart moves inside a certain border that can be framed. This frame constitutes the support and resistance levels.
Support levels are horizontal lines that define the price at which most traders feel the prices will move higher. You can pin point support levels by viewing the day's lowest prices. These lows usually fluctuate around a certain point - which is where the support level is located.
Resistance levels are horizontal lines that define the upper level of trading, the place where there are more sellers than buyers. This is because when the currency reaches the resistance level, it is expected to drop.
What if support and resistance levels are broken? If support levels are broken, they often become new resistance levels, because the currency fails to reach its precious lowest level. If resistance levels are broken, they sometimes continue to rise high above the previous resistance level.
A common forex trading strategy uses Forex support and resistance levels to set the placement of stop loss and take profit limit orders.
Sam Davis - Executive Editor