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Support and resistance is a key to the foundation of the analysis that includes Technical Analysis and Fundamental Analysis.
It is based on the concept of supply and demand.
WHAT IS SUPPORT AND RESISTANCE
Fail to understand this basic SNR will give a negative impact on the trading.
»When Demand is Increase (uptrend) and supply is Decrease (Downtrend): The Price Will Rising.
»When the Supply is Increase (uptrend) and Demand is Downtrend : The Prices Will Decline.
Therefor, to measure the stronger “supply” and “demand” is to identify from support and resistance levels.
SUPPORT: the Level, the point or price, at the lowest movement before it goes Uptrend.
RESISTANCE: the Level, the point or price, at the highest movement before it goes Downtrend.
BENEFITS AND PRIOR USING SUPPORT & RESISTANCE
Is to determine the trend of price movement which includes the strategies of;
1. BREAKOUT FOREX TRADING : the movement penetrated area (trendline) Support or Resistance as confirmation that Support or Resistance level is still strong.
2) If the price movement through the support line, the trend of the market is bearish (down).
2. BOUNCE / REVERSAL FOREX TRADING : Which is a reflection@reversal of the movement area (trendline) at Support or Resistance as confirmation that level Support or Resistance level have reached overbought or oversold.
2) If the price action bounces against the Support, the market trend is bullish and the market will tend to catch up resistance.
PHENOMENON OF REVERSAL
Reversal occurs when the price movement of “Support or Resistance” have turned the function on one line or zone known as SBR (Support become Resistance) and RBS (Resistance become Support).
Support Become Resistance
Price success breakout at “Support” and form a New Support level (below earlier Support level). Price then retrace back to the earlier Support level but unsuccessful break, then the exchange functions on the earlier level become as “Resistance”.
Resistance Become Support
Price success breakout at “Resistance” and form a New High Resistance level (above earlier Resistance). Price then RETRACE back to the earlier resistance level but did not succeed break, then the exchange functions on the earlier level become as “Support”.
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