What is Support & Resistance?

One of the most popular technical analysis concepts in Forex trading is Support and Resistance. It is commonly used alone from historical data or in combination with other types of technical analysis such as chart patterns or psychological levels.

Resistance

Resistance is the idea that a market that is trending up (long) will hit a certain price that will trigger a reversal causing it to turn down. Resistance levels can be used in combination with candlestick patterns such as “Evening Star” or with Psychological levels based on market price such as round numbers (1.00, 1.20, 1.250 etc). Many different resistance levels can be speculated by traders as support and resistance are subjective until the market price proves it to be right.

Support

Support levels occur at the bottom of a downward (short) move in the market. The market price will turn up after hitting support and begin a new up (long) trend. Support and resistance levels are commonly drawn on the chart from historical market prices. A group of traders who are committed to the same technical analysis ideas can influence other traders to place orders at the same support and resistance levels. This group following is often referred to as herd mentality, traders will follow the support and resistance levels analysed by others.

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