Support level.

As a rule, the price of a currency pair moves with some regularity, sometimes going up, sometimes going down, and no matter in which direction the trend moves, there is always a conditional boundary at which the price turns in the upward direction. In trading, it is usually called a support level or line.

Support level – a line on the chart of a currency pair’s movement drawn along significant price lows in a specific time period. Characterizes the price level at which the market enters an oversold state and the price moves upward.

The theory implies that when approaching this line, the supply of a financial asset from sellers begins to decrease, since the price becomes unprofitable, at the same time, the number of orders for sale from buyers increases, which stops the price from falling.

As soon as demand begins to prevail over supply, the market enters the overbought zone and a trend reversal occurs. Drawing a line is quite simple; to do this, you need to open the required timeframe and identify several points that are the minimum price values ​​for a given time period, there must be at least two such points, and connect them with a line. The construction can be done manually or using the tools available in the Forex trader’s terminal.

The support level is one of the main guidelines when trading on the forex market; it tells the trader the place where the price is likely to make a reversal towards growth.

In an uptrend, the turning points near this line are the best places to enter the market, as they can significantly increase the possible profit from one transaction.

In a downward trend, these are the places where a correction against the main trend occurs; it is at these moments that it is advisable to close existing transactions in order to maintain the maximum level of profit.

a flat Forex on the foreign exchange market , then the support level is used as a guide when placing pending sell orders, which are placed a little further than the conditional level. The order is triggered in the event of a breakdown of the Support level and if the price continues to move, the transaction can be considered profitable.

Breakdown of the support level.

If, contrary to expectations, the price of a currency pair instead of reversing continues to move towards a downward trend, it can be considered that a breakdown of the support level has occurred. After this, this line will shift and a new level will be built in accordance with the new minimum points on the time frame under consideration. breakout strategy is built on this phenomenon .

When constructing support lines (levels), it should be taken into account that for each time period of trading they are of a purely individual nature. And the easiest way is to automate this process using special Forex indicators .