Lines of support and resistance.

The movement of a trend in the Forex currency market is subject to its own law; the price either rises to a certain point or falls down.

In this case, so-called minimums and maximums are formed, which characterize the peaks and troughs on the price chart. These points correspond to a certain time period; on each time frame they are different and purely individual.

It is the minimums and maximums that are used as the basis for constructing support and resistance lines; at least two points on the chart of the currency pair are required for construction.

Building a support line.

The support line characterizes the minimum price level that formed on a certain timeframe. When approaching it, the price makes a reversal in the opposite direction and begins to rise. That is, in fact, this line serves as an excellent guideline for opening long positions on Forex.

In order to build a support line, you need to perform several simple steps:

1. Select a time period.
2. Determine several price minimums on it; the points should be the most significant and at the same time not be places of false breakouts.
3. Connect the points with a straight line.

The construction is done using the tools of the trader's terminal, or the indicator of support and resistance lines . The second option is more preferable, since if the price changes you will not have to perform all the steps again.

Drawing a line of resistance.

This line characterizes the upper price limit of the trend, upon reaching which the price rolls back in the downward direction. This is a price ceiling, so to speak, the value of which is constantly changing. At the same time, you should not think that the resistance line always runs horizontally; much more often it is directed towards the existing trend.

The construction of a resistance line is carried out in the same way as support lines, only the highs of a given timeframe are already used as base points.

Trade.

After both lines have already been plotted on the chart of a currency pair, together they form a price channel, which best characterizes the existing direction of the trend, and the width of the channel shows the dynamics of its movement. By the direction of the channel, you can find out whether the upward or downward trend is currently the main one in Forex.

Trading in a price channel is quite simple; one of the options for such a trading strategy is described in detail in the article “ Scalping in a price channel ,” but the strategy can be successfully used in other trading options.

Typically, signals for buy transactions are the following events:

• The price made a reversal at the support line and began to rise.
• The price broke through the resistance level and passed several dozen points.

Short trades are opened when opposite conditions appear:

• A price reversal at the resistance line and the beginning of its movement in a downward direction.
• Breakdown of the support line and further decline in the rate.

At the same time, we should not forget that the direction of transactions must correspond to the general direction of the trend, except in cases where a Forex breakdown .