Support and resistance levels

Support and Resistance is one of the most important concepts and more widely used in the world of public trading in the foreign exchange market, especially, support and resistance levels are undoubtedly one of the most important tools used in technical analysis of financial markets.

Despite the ease of drawing support and resistance levels, but that there is a big difference in the ways of its drawing and using, every trader has his own best way.

The concept of support and resistance commonly used in technical analysis of financial markets, as prices tend to stop or reversal at support and resistance levels anticipated in advance.

Let's see a real example of the support and resistance levels on the chart below:

As shown in the previous chart, levels of support and resistance serve as barriers for the price.

What is the level of support?

It is a specific area on the chart had stopped or reversed downward price them several times. It Called support because it supports higher prices, when penetrating a certain level of support, it turns into a resistance level.

Support area resembling ground stop or bounce then prices.

What is the level of resistance?

It is a certain price level; the price has been stopped or reversed up several times. It is called resistance because it resists high prices and constitutes a ceiling for the price, and when breaking through the resistance level, it turns into a certain level of support.

It is important to remember that there is always a level of support or resistance is perfect. It is also not every breach of the support is an opportunity to sell, not every breach of the resistance is an opportunity to buy, it's not that simple, but requires time and expertise to distinguish between the true from the false breakout.

Importance of trading using support and resistance levels

support and resistance levels play an important role in financial markets and considerable interest to technical analyst and trader, because the majority of traders and even adults of them, paying great attention to these levels, it is important regions to open new deals and profits taken it for open positions.

If you see satellite economic channels or relay Economic newspapers or magazines you often will have heard these labels and concepts frequently.

Three rules to identify support and resistance levels:

• ·         The more stops, or a reflection of the price at the level of support or resistance given the greater importance of this level.
• ·         Must be reflected in the price or stop at the level of support or resistance to a given two or three times at least.
• ·         Levels of support and resistance levels are of the most important new old.