• What are “Support” and “Resistance”?
• 2 types of Support and Resistance levels
  1. Horizontal Support and Resistance Levels
  2. Diagonal Support and Resistance Levels
• What is “Trend Lines”?
• Studying Technical Analysis

What are “Support” and “Resistance”?

The most widely known concepts in forex trading are support and resistance.

The former happens when the market reaches the highest point while the latter when the opposite happens.

Therefore, bear in mind that support and resistance are continuously changing depending on the market moves so it is essential to keep an eye on it.

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2 types of Support and Resistance levels

Support and resistance levels are displayed in the chart in different forms, which are Horizontal and diagonal.

1. Horizontal Support and Resistance Levels

Horizontal support and resistance levels, these are the easiest kind to identify there created when an asset price moves up and down inside the same price range.

A resistance level that gets broken through, usually becomes a support level.

The reverse is also true, a support level that gets broken through usually becomes a resistance level.

2. Diagonal Support and Resistance Levels

Diagonal support and resistance lines are more difficult to identify and created when an asset price rises and falls in the staircase plan.

In case of uptrend, these patterns create increasingly higher points of troughs, in cases of a downtrend, the peaks and troughs become increasingly lower.

Diagonal support levels indicate the trend’s direction.

In order to obtain a particularly effective indicator, it is recommended that both horizontal and diagonal levels be analysed together

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What is “Trend Lines”?

The most usual form of technical analysis in Forex trading is trend lines.

By using this technical analysis tool, we can assess the general direction of the market from our chart.

Trendlines need proper handling since drawing them incorrectly may lead to inaccuracies.

Although it is common to use only two points when drawing a trendline, it is advised to use several points for accuracy and further analysis such as creating wedge patterns.

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Studying Technical Analysis

Take your time and study technical analysis to understand charts with a clear head. You can detect patterns or news that could affect your trade.

For example, you may find that the price action of a trading instrument has reached a high twice with a moderate decline between the two highs, a pattern that in technical analysis is called a double top and indicates a bearish reversal in trend.

Double tops suggest that investors could profit from a bullish trend, selling the asset on a downtrend.

Once you identify this pattern, plan your next move carefully and patiently.