WEBVTT

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When we talk about technical analysis, we cannot avoid to talk about support and resistance because they

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are the most used concepts in forex trading.

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The terms support and resistance were created back in the early 1900s in the stock market.

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Support occurs when traders begin buying supporting a product as it was falling.

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Conversely resistance occurs when traders feel prices are getting too high or expensive and they resist

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buying at that price.

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So support and resistance are price levels or range of prices that a currency pair doesn't often go over

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or under.

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The first important thing you should notice is that support and resistance are not exact numbers.

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They are levels or range of prices.

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In this example we can see a support. The price clearly struggles to go under 1.0850.

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So we say that 1.0850 is a support level.

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If you take a closer look you can see that the price doesn't stop at 1.0850 and

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then goes up. It goes to 1.0852 or 1.0849.

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So we identify 1.0850 as an area but it doesn't mean that the price goes exactly to 1.0850 and then

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it goes up.

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Here we have a resistance instead.

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The price reaches three times 1.0950 area,

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but then it goes back. So you can notice that support and resistance are like a wall.

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When the price arrives there it looks that it hits the wall and reverses.

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Why does it happen?

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Every market price is made by supply and demand levels.

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A support is simply an area where the price starts to be appealing and this increases the demand for

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that currency, pushing the price up. With the same logic,

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a resistance is an area where the prices starts to be seen too high and the demand for that currency decreases,

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pushing the price down.