{"id":9522,"date":"2022-10-12T07:20:16","date_gmt":"2022-10-12T07:20:16","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9522"},"modified":"2022-10-12T07:20:16","modified_gmt":"2022-10-12T07:20:16","slug":"what-is-support-and-resistance","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/12\/what-is-support-and-resistance\/","title":{"rendered":"What is Support and Resistance?"},"content":{"rendered":"\n<p><strong>\u201cSupport and resistance\u201d<\/strong>&nbsp;is one of the most widely used concepts in trading.<\/p>\n\n\n\n<p>Strangely enough, everyone seems to have their own idea of how you should measure support and resistance.<\/p>\n\n\n\n<p>Let\u2019s take a look at the basics first.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-resistance-basics.png\" alt=\"Forex Support and Resistance Explained\" title=\"Forex Support and Resistance Explained\"\/><\/figure>\n\n\n\n<p>Look at the diagram above. As you can see, this zigzag pattern is making its way up (a \u201cbull\u00a0market\u201d).<\/p>\n\n\n\n<p>When the price moves up and then pulls back, the highest point reached before it pulled back is now&nbsp;<strong>resistance<\/strong>.<\/p>\n\n\n\n<p>Resistance levels indicate where there will be a&nbsp;<strong>surplus of&nbsp;<em>sellers<\/em><\/strong>.<\/p>\n\n\n\n<p>When the price continues up again, the lowest point reached before it started back is now&nbsp;<strong>support<\/strong>.<\/p>\n\n\n\n<p>Support levels indicate where there will be a&nbsp;<strong>surplus of&nbsp;<em>buyers<\/em><\/strong>.<\/p>\n\n\n\n<p>In this way, resistance and support are continually formed as the price moves up and down over time.<\/p>\n\n\n\n<p>The reverse is true during a&nbsp;<strong>downtrend<\/strong>.<\/p>\n\n\n\n<p>In the most basic way, this is how support and resistance are normally traded:<\/p>\n\n\n\n<p><strong>Trade the \u201cBounce\u201d<\/strong><\/p>\n\n\n\n<ul><li>Buy when the price falls towards support.<\/li><li>Sell when the price rises towards resistance.<\/li><\/ul>\n\n\n\n<p><strong>Trade the \u201cBreak\u201d<\/strong><\/p>\n\n\n\n<ul><li>Buy when the price breaks up through resistance.<\/li><li>Sell when the price breaks down through support.<\/li><\/ul>\n\n\n\n<p>A \u201cbounce\u201d and \u201cbreak\u201d? Say what? If you\u2019re a little bit confused, no need to worry as we will cover these concepts in more detail later.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Plotting Support and Resistance Levels<\/h2>\n\n\n\n<p>One thing to remember is that support and resistance levels are&nbsp;<strong>not exact numbers<\/strong>.<\/p>\n\n\n\n<p>Often times you will see a support or resistance level that appears broken, but soon after find out that the market was just testing it.<\/p>\n\n\n\n<p>With candlestick charts, these \u201ctests\u201d of support and resistance are usually represented by the candlestick&nbsp;<strong>shadows<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-before.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-before-thumbnail.png\" alt=\"Forex Support and Resistance | Support holding at 1.4700\" title=\"Forex Support and Resistance | Support holding at 1.4700\"\/><\/a><\/figure>\n\n\n\n<p>Notice how the shadows of the candles tested the 1.4700 support level.<\/p>\n\n\n\n<p>At those times it seemed like the price was \u201cbreaking\u201d support.<\/p>\n\n\n\n<p>In hindsight, we can see that the price was merely&nbsp;<em>testing<\/em>&nbsp;that level.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">So how do we truly know if support and resistance were broken?<\/h2>\n\n\n\n<p>There is no definite answer to this question.<\/p>\n\n\n\n<p>Some argue that a support or resistance level is broken if the price can actually close past that level.<\/p>\n\n\n\n<p>However, you will find that&nbsp;<strong>this is not always the case<\/strong>.<\/p>\n\n\n\n<p>Let\u2019s take our same example from above and see what happened when the price actually closed past the 1.4700 support level.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-after.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-after-thumbnail.png\" alt=\"Forex Support and Resistance | Support holds at 1.4700\" title=\"Forex Support and Resistance | Support holds at 1.4700\"\/><\/a><\/figure>\n\n\n\n<p>In this case, the price had closed below the 1.4700 support level but ended up rising back up above it.<\/p>\n\n\n\n<p>If you had believed that this was a real\u00a0breakout\u00a0and sold this pair, you would\u2019ve been seriously hurtin\u2019!<\/p>\n\n\n\n<p>Looking at the chart now, you can visually see and come to the conclusion that the support was not actually broken; it is still very much intact and now even stronger.<\/p>\n\n\n\n<p>Support was \u201cbreached\u201d but only temporarily.<\/p>\n\n\n\n<p><strong>To help you filter out these false breakouts, you should think of support and resistance more as \u201czones\u201d rather than concrete numbers.<\/strong><\/p>\n\n\n\n<p>One way to help you find these zones is to plot support and resistance on a\u00a0line chart\u00a0rather than a candlestick chart.<\/p>\n\n\n\n<p>The reason is that line charts only show you the&nbsp;<strong>closing price<\/strong>&nbsp;while candlesticks add extreme highs and lows to the picture.<\/p>\n\n\n\n<p>These highs and lows can be misleading because oftentimes they are just the \u201cknee-jerk\u201d reactions of the market.<\/p>\n\n\n\n<p>It\u2019s like when someone is doing something really strange, but when asked about it, he or she simply replies, \u201cSorry, it\u2019s just a reflex.\u201d<\/p>\n\n\n\n<p><strong>When plotting support and resistance, you don\u2019t want the reflexes of the market. You only want to plot its&nbsp;intentional&nbsp;movements.<\/strong><\/p>\n\n\n\n<p>Looking at the line chart, you want to plot your support and resistance lines around areas where you can see the price forming several&nbsp;<strong>peaks or valleys<\/strong>.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-resistance-zones.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-resistance-zones-thumbnail.png\" alt=\"Line chart showing forex support and resistance zones\" title=\"Line chart showing forex support and resistance zones\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Other interesting tidbits about support and resistance:<\/h2>\n\n\n\n<ul><li>When the price passes through resistance, that&nbsp;<strong>resistance could potentially become support<\/strong>.<\/li><li>The more often price tests a level of resistance or support without breaking it, the&nbsp;<strong>stronger<\/strong>&nbsp;the area of resistance or support is.<\/li><li>When a support or resistance level breaks, the&nbsp;<strong>strength of the follow-through move<\/strong>&nbsp;depends on how strongly the broken support or resistance had been holding.<\/li><\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-resistance-examples2.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/grade1-support-resistance-examples.png\" alt=\"Examples of forex support and resistance\" title=\"Examples of forex support and resistance\"\/><\/a><\/figure>\n\n\n\n<p>With a little practice, you\u2019ll be able to spot potential forex support and resistance areas easily.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full\"><img decoding=\"async\" src=\"https:\/\/mdr.foobrdigital.com\/wp-content\/uploads\/2022\/10\/bounce-back.png\" alt=\"\" class=\"wp-image-9523\"\/><\/figure>\n\n\n\n<p>In the next lesson, we\u2019ll teach you how to trade\u00a0<strong>diagonal support and resistance lines<\/strong>, otherwise known as\u00a0trend lines.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u201cSupport and resistance\u201d&nbsp;is one of the most widely used concepts in trading. Strangely enough, everyone seems to have their own idea of how you should measure support and resistance. Let\u2019s take a look at the basics first. Look at the diagram above. As you can see, this zigzag pattern is making its way up (a [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[779],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9522"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9522"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9522\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9522"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9522"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9522"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}