In fact, if you are quite new to the currency trading and modern forex markets, then I certainly haven’t any doubt that you may actually already come across such terms as resistance and support. For sure, they are very pivotal to your quite successful trading. Besides, it is really critical to comprehend what exactly causes them, and how exactly to spot those areas of resistance and support on your own currency charts.
Moreover, in the normal and usual cycle of the modern forex market the price is actually influenced totally by buyers and sellers. And if there are a bit more sellers than buyers at some given period of time, then this price is going to be moving downwards. And conversely, if there are a bit more buyers than sellers at some given period of time, then this price is going to be moving upwards.
Well, for keeping that tutorial quite short, I’m going to just discuss support, and so you are actually able to take the inverse of all that information as the cause resistance. In fact, for some purposes of our present explanation in this topic let’s assume also that the price in this kind of market is actually falling and that is the bearish market.
Besides, support will be certainly caused by a big number of buy orders that are obviously waiting in the forex market around or at some certain level below where this price is actually currently. And so anybody will never know where exactly other traders actually buy orders are laying in wait. However, there is a big number of other different reasons why exactly this kind of volume of the buy orders may be actually be waiting at some certain level.
In fact, so called round members are quite often the points for watching. For instance, some quite round numbered price, for example such as 1.5000 on the dollar or euro may actually well be the place which major players, for instance like funds and central banks, would certainly place the orders. Moreover, some major players may also place the orders just ahead of their current option strikes, in the try for defending them should the modern market really approach these levels. And so there are too many different existing reasons for being mentioned, but it is just necessary for you to be really aware that at some particular levels the falling market is going to meet some quite serious opposition.
Besides, some shear volumes of those buy orders may certainly be quite strong for overcoming a number of sell orders, thus actually causing the price drop. And so the price is going to battle for breaking below that level of those buy orders.
Surely not a single piece of knowledge can be rock solid guarantee against losses, in particular on Forex market, but sometimes just one Forex books can be of big service to you.