- Wednesday, 02 December 2015
Support and Resistance levels are crucial to interpreting price charts efficiently. The course prices currently move, makes it clear on the most credible factor and specifies the point that prices are expected to go up or down.
Let's start with Support level as a chart point acting as the break for prices to lead their further down course. Traders adhere to the level, since being at the forefront of speculating if the asset is further worth being sold or purchased.
Resistance level makes certain restrictions on the further price rising. The case is buyers may have no intention to pay the price that is higher than supposed to be, even though selling traders have enough power to push the price to rise. If the number of purchasing dealers is huge and they are too strong, then resistance acts like a break leading the price to rise further. In the meantime, if the number of sellers is more than buying traders, the price will go down. It is easy as A, B, C.
Both levels play the significant role regarding the behavior pattern market players adhere to depending on the situation. The resistance level specifies the point dealers are not intended to purchase above which. At the same time, support defines the price below which dealers have no desire to sell. The image posted below shows the graphic example of support/resistance on the dedicated EUR/USD price chart:
Pay attention that the traded price was not lower than 1.3266 while the break was set at the point of 1.3398 for the price going up twice before reaching the breakout consequently. The resistance level makes it easy to bid on a PUT. Unlike it, support signs lead you to make a CALL bid. There is nothing hard in support/resistance strategies trading since they have tended to become among the most credible techniques to rely on.
Let's fix on the following example:
You got a sign where it is underlined that Gold is exercising resistance at 1650.100 USD following the next resistance at 1655.100 USD. The situation demonstrates that if resistance at 1650.100 USD is broken, the price will lead its up course until facing the next level at 1655.100 USD. In case the resistance is being broken – feel free to place a CALL. If it makes not possible to break above the level going down from the resistance price, place a PUT.
The following example will show you how it works.
Gold: reverting from 1255 USD
Gold initially demonstrated the increasing tendency during the current session but failed to be on the rise above the point of 1255 USD sustaining pullback and leading the lower course. It is now dealt at 1252 USD, and the commodity of commerce is expected to make the much lower move if the current selling activity remains prevailing. In such a case, we advise you to bid on PUT if the level of 1255 USD goes on holding.
As it can be seen at the chart picture, 1255 USD is a heavy resistance. The reason is the level was pointed out twice as a breakout target in the past. Dealers were not lucky enough to break, boosting the probability of another price reversal from the point. In the given sign, our experts showed that the PUT is likely to be placed in case the level continues its resistance course. The analysis has proved to become correct as indicated at the picture with Gold facing too much resistance resulting in going much lower being not strong enough to break 1255 USD.
As the world turns, the market variability is another point that may cause hesitations and concerns among binary traders. The signals represented in chart pictures, can be treated differently and are only up to the situation. Price movements do not always meet traders’ expectations as well. Moreover, traders should keep in mind that support and resistance have no scientific ground. These levels significantly depend on the specific time frames and may alter due to the market variability, fundamental information, news and so on that market is influenced with. Traders should thoroughly monitor the latest economic news and only rely on their mind. Learnmarket professionals are here to make the trading activity you lead gradually simplified. Keep in touch with our expert team, and we will never leave you alone.
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