Log in or register to download unlimited Forex robots!
Lesson 28: Market Mysteries: Support and Resistance
What are Support and Resistance?
These are specific price levels on charts that seem to act as barriers, where the price of a currency pair stops and may change direction.
Support: This is a price level where the currency tends to stop falling and might bounce back up. It's a level below which traders typically won't let the price fall. Imagine a floor where a bouncing ball (the price) hits and bounces back up. That's your support level. You create a support line by drawing a line from one low point in the price series to another. When this line is broken, it's a significant event, signaling that the trend might be changing. It's like a psychological barrier where traders feel it's a good value to buy, so the demand increases, stopping the price from falling further.
Resistance: This is the opposite. This is a level where the currency tends to stop rising. It's a price level where selling is strong enough to stop the price from rising any further. It's a level above which traders are unlikely to push the price. A resistance line is drawn by connecting high points in the price series. Knowing where this line is can help you set realistic profit targets. Think of it as a ceiling that the ball can't break through. Here, traders often feel it's a good time to sell, increasing the supply and stopping the price from rising further.
Why are Support and Resistance Important?
*They help traders predict where the price is likely to pause or reverse.
*These levels can suggest good points to enter or exit a trade.
*By understanding these levels, traders can set better stop-losses and take-profits.
How to Identify These Levels
*Look at past price movements. Where did the price stop and change direction? These points can become future support or resistance.
*Sometimes, prices stop around round numbers like 1.3000 or 1.2500. Traders often place orders at these levels, making them potential support or resistance zones.
*By connecting the highs and lows on a chart, you can identify potential diagonal support or resistance levels. Draw straight lines connecting highs or lows on a chart. These lines can act as diagonal support or resistance.
The Psychology Behind It
Support and resistance work because they reflect the collective memory and actions of traders. If traders remember that a currency pair stopped rising at a certain level before, they might be hesitant to buy above that level again, creating resistance. The same goes for support levels.
Horizontal vs. Diagonal Lines
Horizontal Lines are drawn across relative highs or lows. They're useful when prices are moving sideways, within a range.
Diagonal Lines connect a series of rising lows or falling highs, indicating the trend's direction.
Using Support and Resistance
*Look for Confirmations. Before trading, see if the price respects these levels. For example, if the price approaches support and starts rising, it's a sign of strength.
*Combine with Other Indicators. Use support and resistance along with other technical indicators for a more complete analysis.
*Remember, They're Zones. These levels are not exact. They're more like zones where the price may stop and reverse.
*Stay Flexible, be prepared to adjust your understanding of these levels as new price data comes in.
So, support and Resistance are essential tools in a Forex trader's toolkit. They help in understanding market movements and in making informed trading decisions. While they're based on trader psychology and past price movements, remember that they're not always perfect. Use them wisely along with other trading strategies for the best results.
Profit posts by forum members!
Why don't many people post their daily winning results?
MT4talk PRO members can Turn off MT4talk daily winning result post requirements for $49.99 / month. More info...
Latest profit posts from the Trade Executor EA users.
By using the MT4talk website, you automatically agree to the Forum Rules & Terms of Use, as well as the terms below.
Everything you see on the MT4talk website is created by its users, mainly the members of the MT4talk forum.
What is MT4talk?
MT4talk is an online Forex forum with over 5000 Forex robots and over 3000 Forex indicators uploaded by forum members in the last 10 years, available to download from forum posts. The Uploaded file does not come with support.
The website doesn't sell Forex robots and doesn't provide support for the ones you download. MT4talk offers a PRO membership, allowing you to download unlimited files from forum posts. Even though the site usually doesn't provide support for downloaded Forex robots, if you're new to Forex and need help, you can buy the MT4talk dedicated support membership from the MT4talk forum. The MT4talk Dedicated support subscription is only available for purchase for MT4talk PRO members.
The MT4talk Team also provides an Artificial Intelligence Forex robot called "MT4talk Forex AI Signal - Trade Executor EA" to PRO members. However, this Forex robot is only a bonus and is not included in the original PRO membership.
Updates for the Forex robots may be limited or nonexistent, depending on the creator. If you choose to download any Forex robot or setting file from the forum, you acknowledge that you are using it at your own risk. MT4talk PRO membership is a digital product. Therefore, after you complete the PRO membership purchase, there is no refund available!
We are conducting real-life tests on Forex robots to assess their performance. For certain robots, we may use a demo account to conduct tests, and for other Forex robots, we may use a real Forex account. It's essential to recognize that we are not financial advisors and cannot provide investment guidance. Our objective is to discover effective market analysis solutions through testing various strategies, which could be beneficial to our community.
CFTC RULE 4.41 – HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS, IN GENERAL, ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
Disclaimer - No representation is being made that any Forex account will or is likely to achieve profits or losses similar to those shown on backtests in this forum. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. All information on this forum is for educational purposes only and is not intended to provide financial advice. Any statements posted by forum members or the MT4talk EA Tester Team about profits or income expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold the MT4talk team and forum members of this information harmless in any and all ways.
Affiliates Disclaimer - The website may have links to partner websites, and if you sign up and trade through these links, we will receive a commission. Our affiliate partners are FXOpen, FBS, LQDFX, and MyForexVPS.
Copyright MT4talk.com Forum Rules - Privacy Policy.