Two of the most widely discussed facets of technical analysis are the concepts of support and resistance. Although this study is very often regarded by beginning traders as complex, our purpose is to simplify the subject by focusing on the very basics of what beginning traders will need to know. A thorough study of support and resistance is not possible here, but there is a mountain of information available on the subject.



Very rarely will you see price moving in a straight line on a forex trading chart. Actually, it usually will appear sawtoothed, with prices moving up, then down, then up, then down.

When you draw a line connecting the lowest price points, that is your support line. To draw a resistance line, you would connect the highest price points. This is only a very basic idea to provide a picture; there is more to determining which bottom points and which top points need to be considered.

Now when you look at this support line connecting the low price points, you can see how it tends to act as a floor, preventing prices from going below that level. Rather than break through this line, prices are more likely to bounce off the support level. But when the price finally does manage to break through the support level, it is likely to continue dropping until it reaches another support level.

A resistance level can be viewed as the opposite of a support level. This is the level at which the price tends to find resistance as it seeks to go higher. The same is true as with support; price is more likely to bounce off the resistance level rather than break through it. But once price does break through resistance, even by a tiny amount, it is likely to continue rising until it finds another resistance level.

A support level often becomes the new resistance level when price pushes through it. Conversely, when price breaks through a resistance level, it will generally find support at that level in the future.

Many technical traders will use the support and resistance levels they've identified to choose strategic entry/exit prices because these areas often represent the prices that are the most influential to a currency pair's direction.

In the beginning, understanding the concept and explanation behind identifying support and resistance levels may seem easy. But as new traders delve into this study, they soon discover that support and resistance can come in a variety of forms and is actually more tedious to master than it first appears.

Hundreds of price patterns can be identified using only support and resistance, and they can be found in any time frame charts. Entire trading strategies can be based solely on support and resistance levels. It is very possible for a trader to make a good living trading forex once these concepts are mastered. So if you're looking to get up and running as quickly as possible, we urge you to start your forex trading education by mastering the concepts of support and resistance.