Support and Resistance in Forex

When professional forex traders think about entering a position, their trading system may use either fundamental analysis or technical analysis. If their system uses only technical analysis, there is a very high chance their system uses supports and resistances.

A support is a price or exchange rate that prices do not go under. This happens because of big buying orders waiting at these levels. If there are many buy orders at the 1.5 exchange rate for EUR/USD, it will be hard to go below that price.

A resistance is the opposite of a support. It's a price or exchange rate that make an "upper bound" for currency pairs. This occurs because of big sell orders awaiting on these prices. If there are many sell orders on the 1.55 exchange rate for EUR/USD, it will be hard for the exchange rate to go above this level.

Supports and resistances come in many shapes and forms. However, there are two common forms for them. One is horizontal lines, which means the exchange rate does not go above or below a specific price. The other one is diagonal lines, which means prices are moving in a "tunnel", either upwards or downwards.

Good luck with your trades,
Nadav

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