The Support and Resistance Level

Many traders are rely on what are known as support and resistance levels. Support refers to a low price which is repeatedly seen as being the bottom of the market and from which there is a tendency for prices to rise. A ‘resistance level is a high price beyond which a currency is rarely traded.

The idea behind the analysis is simply that prices rise and fall according to well established trends and that the currency market possesses clearly identifiable patterns which can be seen.

Knowledge and experience come into play here, but it is also a question of using the numerous analytical tools that are available and this means having a sound working knowledge not just the patterns of price movement but also of the tools at your disposal.

When the currency break through either its support or resistance level, its price is likely to continue in that direction. If the price of a currency rises above its resistance level it is considered to be bullish and the price can frequently be expected continue to rise.

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