Support and resistance trading plays a major part in price action trading. Support and resistance lines are drawn on a chart to determine possible reversal points. If the price has reversed at a certain price level on the chart before, there is a possibility that it will reverse again at the same point when it returns to that price level.
The reason we draw support and resistance lines is very simple. If you have a support or resistance line drawn on your chart at a price reversal level, you can clearly see when the price gets to that level. If you are in a trade, you may want to get out at a support and resistance level as there is the potential for the price to reverse at that point.
The importance of support and resistance trading.
It is important to draw support and resistance lines on your chart when you are trading, as lots of traders pay attention to support and resistance trading, so it is often a good place to enter or exit a trade, as mentioned above.
Areas of support and resistance hold a great deal of information about which way the market will go when it hits a support or resistance line. Will it reverse at a support and resistance line or will it go right through. This is a major dilemma for many traders, and knowing what will happen at this point will make you a lot of money.
I discuss support and resistance trading at length in my Forex training course and i can give you the knowledge you need to predict with the highest probability what will happen when the price comes up to a support and resistance line.
For more information on my course please click on the link. Forex training course.
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