Now we will try to understand and recognize what “support” and “resistance” in Forex
Perhaps you still remember the concept of supply and demand (supply and demand)? When a request (demand) increased and supply (supply) down, then prices will go up. Conversely, if the offer (supply) rises and the demand (demand) down, prices will drop. That said economics teacher during junior high.
Well, in fact, the price of the currency in the market is always moving up and down. It is also influenced by supply and demand on the currency. Then, there was a time in the market where the price stops moving up or moving down stops. This is certainly due to demand or supply it is not large enough to cause prices to rise or fall.
In technical analysis, we can anticipate roughly when supply or demand increases. The trick is to identify support and resistance level that was.
Support is an area where the price level at that level DEMAND large enough to withstand the decline in prices. At this level, the price tends to stop moving down and likely to rise again. Practical language, the support level is expected to hold its bearish movement.
While resistance is an area in which the price level at that level SUPPLY large enough to stop the rise in prices. At this level, the price tends to stop moving up and will likely fall again. Practical language, the resistance level is expected to hold its bullish movement.
Now let us look at the following picture:
The above example shows the line zig-zag form graph moving upwards. When the price goes up and then down again, then the highest point reached before descending again that’s called resistance.
When the price moves up again, the lowest point reached before the price goes up again that we refer to as support. That’s how we determine the support and resistance levels in line with price movements up and down all the time.
Please also note that the level of support and resistance is not necessarily a definite level. That is only natural that some traders disputing some of the numbers when determining support and resistance. Importantly, the support and the resistance is in the range of numbers that are not too far away.
Resistance becomes support, support becomes resistance
Do not be confused. Indeed the case. Here’s the story …
Although at the beginning of the discussion of support and resistance is said that these levels were able to “hold back” the rate of price movement, but it does not mean that these levels will last forever. A support will no longer be able to withstand the downward movement if it turns on when the demand is no longer big enough. In contrast, the same thing will happen to the resistance, in which the supply is no longer large enough to withstand the upward movement.
Imagine you are standing in regards to a room. There are a floor and ceiling. Ceiling our analogy as resistance, while our analogy as a support floor. In your hands, there is a golf ball. You throw the golf ball up to touch the ceiling. If your throw is not strong enough, then the golf ball will bounce again downward.