Support and Resistance
Support and resistance are two crucial terms for a technical analyst to understand binary options trading. In fact, without getting to grips with base support and resistance, any technical analysis is almost impossible. They are the backbone of an asset chart. They indicate strongly what behavior is occurring.
Support
Support is a level depicted on the chart by the lines at which the asset does not fall below. Historical patterns can demonstrate this line. It is essentially the level which stops the asset price falling and supports it. Understanding where the support line on a chart is over different periods of time will ensure that a trader is able to place their orders with the binary options trade appropriately. For instance, if a support level is set at 144 EUR/USD, then it is unlikely that over the next hour the price will fall below this support level. Aiming to have binary options for below that level will probably require a fundamental event to happen. Otherwise, the support level will maintain a price above the support level.
Resistance
Resistance is the opposite of support. It is the level at which a price will not go above as a general rule. This can be seen as the point at which sellers begin to be more numerous than buyers. Understanding this resistance can be very beneficial for trading. For example, when stocks hit their long term resistance, they are likely not to pass it, unless they is going to break out. Understanding, again, whether resistance is finally going to be broken or not will be down to understanding the volumes of trade and a number of other factors.
In range betting, and high-low betting, resistance and support are crucial. When the price moves above the resistance level, often, it will become the support level. Similarly, if the support is broken and the price moves down, it will most likely become the resistance level. By understanding support and resistance, there are a great deal of opportunities for a trader, especially in the short term. Resistance happens all the time in trade charts, as does support. By combining technical analysis with other analysis, so that one understands that support and resistance are not going to be broken, it is possible to make good predictive outcomes on a consistent basis.
See Also:
- Who is Bob Prechter
- What is Technical Analysis?
- Who is Adam Hewison
- Non-Traditional View of the Markets
- 3 Rules that Govern Impulse Waves
Recommended By Amazon:
- The Mathematics of Money Management: Risk Analysis Techniques for Traders
- Risk-Opportunity Analysis
- Market Sense and Nonsense: How the Markets Really Work (and How They Don’t)
- Trade Your Way to Financial Freedom <– This is the best book I’ve ever read on Risk Management ~ Tim McMahon, editor
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