For the uninitiated, support and resistance in forex are the trade calls similar to call and put in binary trading. Support is the time when conditions are quite favorable for buying and the trader is under considerably high buying pressure. In the exact contrast is the situation of resistance when the selling pressure is high. These two conditions are not working the same way always. Let’s find out the best facts about support and resistance that can help you make better decisions.
Do not try support and resistance too often
Many traders propose that a lot of trade calls need to be taken near support and resistance areas. The decision taken during these areas may result in quick results, though; but, the pressure of price tested so frequently may weaken the trends created. So, much contrary to the traders’ advices, try not to test the support and resistance areas too many times.
Treat support and resistance as areas and not lines in price chart
The clarity of situation is a common thing desired by all types of investors. So, under the pressure of delivering such clarity, the experts tend to present support and resistance as lines. But, the truth is these are actually the areas and nothing is sure and confirmed. After all, we are dealing with an event supposed to take place in future. So, presenting it in a definite form, such as line, is more like misleading the trader into buying or selling.
The most common problem associated with presenting SR (Support and Resistance) in line form is missing of the trade or selling at lower price. For example, if the price does not touch the figure as proposed in the line, the trader misses buying. And if the trader assumes the high point to be the final highest price, the chance of earning higher at a price higher than proposed is clearly missed. Thus, the wisest way is to place the call a bit higher or lower than SR line than to stick to the line blindly.
Trade near Support and Price to get better reward for risks taken
Reading the price pattern is really important especially for a swinging strategy fanatic. If you choose to enter the trade at point away from SR region, you certainly are going for a stop loss that is placed far apart. This means you tend to put more money at risk and do not take decisions as soon as the downward trend is started. The same goes for the selling part too. Since you have chosen an area away from support, then the time taken by the trend to reach the desired figure is quite high. Thus, the very essence of trading, that is, making quick money is lost in the process.
Contact Australia forex brokers if you want to understand the complications of Support and Resistance better. Their years of experience in Forex trading offers ample and reliable assistance to you in making money by taking correct calls at the correct time.
