What is Support and Resistance? Increment now you winning trades!
Support and Resistance is one of the most needed knowledge to successful trading at the Forex market. No matter if you trade manual or use signal services, Support and Resistance are a great way for incrementing your win rate. Sometimes it is possible to trade only using this two indicators.
To conclude, Forex prices base at supply and demand. If more assets are available at the market, then the price will fall. If fewer assets are available at the market, then the price will raise. Most assets (currency pairs, resources and stocks) are not volatile. That means that the price move in a small area up and down.
At the market trader buy and sell constantly assets. Trader which want buy goods wait until the price is low. Trader which have already an asset wait at a good price to sell them.
How to use Support and Resistance?
The area of price moving is limited by the support and resistance. A Support is a line where the price is so low that more people buy the asset whereby the price rises again. The Resistance is the area where the price is so high that more people sell her asset. That cause in a falling price. That is really important because you can expect that the price will reverse at the touch of a Support or Resistance. More touches of the Support and Resistance means that this lines become stronger.
When the price fall and touch the Support you can expect that this is one of the lowest point of price movement in less time. When the price raise and touch a Resistance you can expect that this is one of the highest price movement. That means, if you want to place a CALL trade you have to wait until the price fall down and touch the Support. If you want to place a PUT trade, then it is the best practice to wait until the price will touch the Resistance.
The other way is that a Support or Resistance broke. In this case the broken Support become the new Resistance or the broken Resistance become the new Support. This ends in most cases in a big price movement. There are price action strategies which aim for these breakouts and the price movement.
In this image are more Supports and Resistances, but that are the main lines for this part of the charts. A good technical indicator supported by much chart software like MetaTrader are the Fractals. To test Support and Resistance the free trading demo of the platform developer SpotOption is recommended.