hat are support and positions and take short
resistance? positions.
Support levels are prices where buyers have shown or are likely size="-2">http://www.actionforex.
to show strength. Resistance com/images/stories/articles/tut_t
levels are prices where sellers ech_3_1.gif
are likely to be strong.
Resistance
Support
Resistance levels perform the
Support levels essentially give opposite function of support,
the market a 'floor', since they which provide a 'ceiling' to the
are areas where buyers tend to be market. If the price rises to a
strong. If the price falls to a strong resistance level, short
strong support level, traders sellers should be expected to
should expect buyers to step in enter the market and traders in
and drive the price up, or at long positions may cover their
least keep it from moving any positions to take profits. This
lower. combination of selling pressure
will often drive the price lower.
Because support levels are prices
where buyers are supposed to be Resistance functions in the same
strong, if the price falls below manner as a safety net for short
a support level, this is a signal positions and an entry point for
for the market. It shows that traders looking to buy on a
there is more selling pressure breakout.
(or less buying) pressure than
previously thought, and it often leads more traders to exit long size="-2">http://www.actionforex.
com/images/stories/articles/tut_t just above resistant levels, some
ech_3_2.gif large institutional traders
attempt to drive the price higher
When a price breaks through a in the short term just to trigger
resistant level, it often these stops. Without any real
triggers a large number of stop force behind the move higher, the
orders and makes for even greater price can fall back to
buying power. Often the stronger resistance. The same dangers of
the resistant level, greater the false breakouts apply to support
number of stops that are levels as well.
triggered and the larger the move
above resistance. size="-2">http://www.actionforex.
Unfortunately, not every breakout com/images/stories/articles/tut_t
is valid. Because they know that ech_3_3.gif
many traders place stops to sell
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