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Support and Resistance is a common term used by every or most Forex traders, almost every Forex traders have a way they identify the support or resistance zones in the market Chart, a very few traders don’t believe such zones exist depending on their trading strategy or perhaps may assume such zones as irrelevant. If you are an active trader, you must have noticed that these levels are very important as price often reacts on reaching the zones.
Generally, Support is the point at which a downtrend gets to halt for a while and perhaps reverses opposite its direction while price finds resistance when an uptrend get to halt or reverses opposite its direction.
Why it’s called Support and Resistance
The market is always in motion, to the upside or the downside, money is what moves the market, from buyers or sellers, you could call it demand and supply. More buyers would push price upward and more sellers would push price downward.
Support is synonymous to saying “Yes!” while resistance is synonymous to saying “no!”. If you observe what happens in Parliamentary sittings where members of the house would need to respond to a motion moved, those in support would say “Yea” while those opposing would say “Nay” then the majority carries the votes. The illustration is similar to what happens in the market. The Support zone is like the “Yea” zone while Resistance is the “Nay” zone, then the majority carries the vote.
Therefore, we can view Support and resistance levels as “Yes” and ”No” levels, when buyers or sellers take charge of the moment, price would begin to move in the direction of the majority, but as we all know, we have different players in the market, both intraday, swing, position e.t.c. some buyers or sellers won’t hold positions for long, some would decide to withdraw their votes, thus making the opposition party the majority, that’s where market may turn and the cycle continues. The Yes or No Zone has existing buyers or sellers that may still be present in that area, that is why price often reacts when it gets to such zones.
Therefore, when next you are taking a trade, you may want to ask yourself a few questions drawn from ideas shared on this topic, then deciding on which group you should belong to, The” yes” or “ No” group?.
Happy Trading all.
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