Forex trading has emerged as a popular mode of investment in these hard economic times. In fact, currency trading touched the levels of the stock markets in terms of volume of trade in a very short period of time. This is because of the ease with which one can make investment in Forex markets and also earn handsome profits. However, Forex markets are also volatile and sensitive to burn the hands of new investors. To help beginners, there are many indicators in Forex trading. Support and resistance are two elements that are very helpful that any investor who trades in Forex must learn.
Support and resistance are specific levels to which currency pairs gravitate during trading in Forex markets. Being careful and alert to these levels is important in order to make profits more frequently from the Forex markets. In general support lines are the troughs or the lowest levels to which currency prices gravitate while resistance lines are the peaks of the prices of these currency pairs. Resistance is also called ceiling price while support price is also called the floor price. You will find the currency pair facing trouble braking through to these support and resistance price levels.
These support and resistance levels have sentimental value for many investors and they begin to trade currencies whenever they touch these levels. They can be seen buying or selling in a hurry as if they know they will make profits once currency pairs have broken through to these levels. If you are new to currency markets, you must realize that support line represents a level where selling pressure fails to exert and gives in to buying pressure. As a trader, you must be able to draw your own support and resistance lines to work as alerts for you. You are able to take better decisions in the Forex markets when you have these lines drawn in a chart in your chamber.
After hitting these support and resistance levels, the market could change direction or it could create history by continuing in the same direction. You must devise a strategy to reap the rewards even in this situation if it takes place in the Forex markets.