Foreign exchange consists of a vast network of people from all over the world, who use the platform to trade currencies worth millions every single day. Even though it is a greatly rewarding source of income, starting off on forex trading remains one of the toughest part of the business.
More often than not, new traders give up even before they have taken part in the trade long enough to make a substantial amount of money. And with good reason. Forex trading is not easy for anyone without the proper exposure to it. That is why sec.rakuten.com.au is the best place for any new forex trader to start.
What Support and Resistance Levels Really are
It can be exhausting to try and learn all the different phrases and words that traders use in the business. Some of them can be confusing as well, especially when the word and it’s meaning have no relation whatsoever. Take for instance support and resistance. Support actually stands for the word low, while resistance actually stands for the word high.
Support and resistance levels usually work hand in hand, and they can be found on the candlesticks of the charts. If you are a new trader, you should not be worried about how to spot the support and resistance levels, because they are very visual and this makes it really easy for traders to spot them.
How Support and Resistance Levels Actually Work
When we talk about support and resistance, we refer to the already determined levels of a security (high or low). These levels are meant to show the trader the stopping and reversing of a price. The reason why they work so well together is because broken resistance gives rise to support while broken support gives rise to resistance. Therefore, whenever there has been a past support, you can be sure of future resistance, and if there was a past resistance then you can also be sure that there will be future support.
At the support level which is low, this price will find support as it falls, and then bounces off of it instead of breaking through it. However, if it happens to actually break through, then it will continue falling, until it finds another support to bounce off of. On the other hand, at the resistance level, which is high, the price will find some resistance as it rises. It will then bounce off of the resistance rather than break through it, and if it actually does break through, then it will continue rising until it gets to yet another resistance level.
Why Support and Resistance Levels are Important to Master
It is very important for a trader to have some knowledge on support and resistance levels, because they will come in handy when you want to know when you should buy a security, and when you should go ahead and sell it. Any experienced trader will tell you for a fact that it would be a big mistake to sell on support or to buy on resistance. With forex trading, the goal is usually to increase your profits, because that is the only way that you will be able to notice any growth to your investment.
How to Keep an Eye on Growth and Resistance Levels
As mentioned earlier, the levels of support and resistance can easily be identified on the chart candlesticks, so they will be visible on any trend. During an uptrend, a trader is supposed to buy when they see a u-turn at a past resistance. On the other hand, on a downtrend, you should sell when you see a turn at past support.
Forex trading can be tricky for any beginner, so it is advisable that you get as much information as you possibly can. And as this business is constantly growing, change becomes inevitable, and so even experienced traders have to keep themselves updated on all the emerging ways to conduct foreign exchange. Learning about support and resistance levels is just one of the many things that will lead to future success in forex trading.