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| Support and Resistance Lines in aSideways Trend |
Dear
traders, ✍in this article, I would like to talk about one of the most important
and indispensable concepts of technical analysis: Support and Resistance
levels. Without understanding these concepts, a trader in the forex market is
like a ship🚤 without knowing where it’s headed. 🧭Support and resistance levels
can assist in determining when to enter or exit the market, as well as in
identifying the direction of price movements and making buy/sell decisions.
🚦Support
levels are determined at points where the price has shown multiple reversals or
reactions, indicating that it cannot decline further. When the price reaches a
certain level, a decrease in sellers and their withdrawal from the market is
observed. This leads to the formation of support levels.
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| Support & Resistance in a Downtrend |
🚦Resistance levels, on the other hand are levels where
the price has shown a tendency to stop or slow down its upward climb,
indicating that it cannot rise further. When the price reaches a certain level,
a decrease in buyers and their withdrawal from the market is observed. This
results in an increase in sellers, causing the price to react at the resistance
level.
We can divide the support and resistance levels
visible on the charts into 3 places:
📈In an uptrend:
-Support levels are known as levels where the price
may stop falling and a line is drawn to support the upward trend. It is
expected that the price will find support when it approaches this line.
-Resistance levels are known as levels that limit or
halt the price’s upward movement. This line represents the boundaries of an
upward trend. When the price approaches this trend line, it tends to show a
downward reaction.
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| Support & Resistance in an Uptrend |
📉In a downtrend:
Support levels are levels where the price tends to
stop or slow down during a downtrend. When the price approaches the trend line,
it may show an upward reaction from this level.
Resistance levels are levels encountered by the price
during a downtrend that can halt or slow down its upward movement. When the
price approaches this trend line, it reaches the boundary of the trend and may
turn downward.
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| Support and Resistance Lines in a Downtrend |
📊In a sideways trend:
Support and resistance levels. As price moves within a
specific range as seen on the charts, it creates a horizontal channel defined
by upper and lower boundaries. The lower boundary of this channel is considered
as the support level while the upper boundary is regarded as the resistance
level.
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| Support & Resistance line in a Sideways Trend |
❗The Forex market is highly sensitive and volatile. It
is not always possible for prices to remain within the support and resistance
levels. Over time, support and resistance levels can be broken and new support
and resistance levels can form. When trading in the market, it would be a
better option to consider risk management techniques and other technical
analysis tools as well.