Support And Resistance In Trading
Get these Forex Scalping Cheatsheets FREE. Read this shocking FREE 40 page PDF FRWC Brutal Truth Report about Forex Robots. FRWC Live Trading Competition had a cash prize of $150,000 for the winning forex robot developer. This was the first ever competition of its kind. The second FRWC Competition will be held somewhere in 2010. Learn this powerful secret Fibonacci Retracement method FREE that pulls 500+ pips per trade. Market keeps on moving up, down and sideways. While many trader try to trade trends or breakouts, most of the time the market is moving sideways between two levels known as Support and Resistance.
Support and resistance concepts are the most simplest and easiest to identify with indicators and master on charts. Support and resistance trading is also profitable. These two levels are established in the market in response to the balance of supply and demand of a particular stock, currency pair or for that matter any security.
Market just reflects the crowd behavior. What the investing crowd is thinking, the market is thinking the same. Crowds tend to behave consistently. Support level is established at a certain price level when the buyers think that the stock, security or the currency pair is attractively priced at that level. So, the crowd continues to believe that price to be the best buying price and the support level keeps on appearing again and again until fundamentals change and the crowd starts new thinking.
Just as the support level is established by the buyers in the market, the resistance level is established by the sellers in the market. Sellers get worried when the buyers start bidding the price of the stock, currency pair or the security up. They are only comfortable with the price reaching certain level.
Above this level, seller consider price to be too high. So they start selling at the level that they have in their mind. Crowd mentality takes hold of the market and the selling pressure forces the price to drop again to the support level where the buyers again step in and start buying forcing the price up again.
The price action continues between the two levels. Support and resistance levels are significant forces in the market. They represent price levels where the crowd makes financial decisions about profit and loss.
Support and resistance forms the basis of many successful trading strategies in almost all markets stocks, bonds, forex, futures, options, ETFs, commodities and others. Buy at the support and sell at the resistance is what many traders do. In Channel Trading as well, support and resistance are the levels where traders buy and sell.
Support and resistance trading is also known as range trading. The price differential between the support and resistance is known as the range. Calculating daily ranges is an important thing for many day traders. It is essential for you to understand the concept of support and resistance as these two levels are used extensively by traders.
