Forex – Support and Resistance levels
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The support is that level at which the price will never get below, for a given period of time, due to high concentration of demand. On the contrary, resistance is the given level above which the prce will not rise ever, due to increased sale volumes as you approach the given price.
Support and resistance levels can be static or dynamic, depending in which way the the lines can be drawn ( horizontal if they are static and oblique if dynamic ).
When a support level is exceeded that same line becomes a resistance level for ascending trends. On the other hand, if a resistance line is exceed, that line will become of support in future descending trends.
Regarding support and resistance levels, you must keep in mind three things:
- if there are many trades next to a resistance line that means that many traders have bought and now want to sell.;
- you will have to evaluate accurately the distance between the support line and the resistance one in order to define their strength;
- you will have to evaluate accurately the period of time in order to define the strenght of the lines.
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