Technical analysis in the forex market

Support and resistance

It is very important to be conscious about the support line and the resistance line in the forex market. In short, the support line helps for the forex market to go down any more even in the down trend, on the other hand, the resistance line helps to go up further in the up trend. In the downward movement of the forex market, the nearest bottom should become the first key support, and the second nearest bottom become the second key support as shown in below.

First key support, second key support

On the contrary, in the upward movement of the forex market, the nearest top should become the first key resistance, and the second nearest top becomes the second key resistance as shown in below.

First key resistance, second key resistance

Once the forex market breaks the resistance, it is often the case that the resistance line might change into the support line. This is caused by the short position holders who are still waiting a dip stage to buy back after the resistance line is just broken. The phase of breaking support line shows a bit different face, where the long position holders are impatient to keep their positions because the speed to fall is faster than that to rise and the rallies are apt to smaller.

Most players must be conscious to the location where the support line is and the resistance line is. The player who wants to buy hopes the forex market is approaching to the support line and he should cut the position if it breaks. In the same way, the short position holder would wait until the forex market is coming near the support line. Thus, these representative behaviors around the support line or the resistance line give us the short cut for easy approach to the forex market.


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