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Support and resistance strategy is based on the phenomenon of price repeatedly being blocked or supported at specific levels. Support is a price level where buying pressure exceeds selling pressure during declines. Resistance is a price level where selling pressure exceeds buying pressure during advances. Traders buy near support, sell near resistance, or trade with the trend after breakouts.
Identify key levels: Find price levels through historical prices that have been touched multiple times but not broken
Buy at support: Look for buying opportunities when price pulls back to support
Sell at resistance: Look for selling opportunities when price rises to resistance
Role reversal: After breakout, support becomes resistance and resistance becomes support
Multiple confirmation: Confirm support/resistance validity with candlestick patterns, volume, etc.
Support and resistance strategy is the most fundamental and practical trading method, applicable to all markets and timeframes. In forex trading, it can be used to identify entry points, set stops and profit targets. This strategy is particularly suitable for range trading and breakout trading, being one of the core concepts of technical analysis.
Simple concept, easy to understand and apply; applicable to various market environments; can clearly set stops and targets; works well with other technical analysis tools; historical support/resistance levels have psychological price significance.
Support/resistance levels are not precise price points but price zones; in strong trends support/resistance may be easily broken; requires subjective judgment, different traders may identify different key levels; false breakouts are frequent.
When using support/resistance strategy, note: don't rely too heavily on single support/resistance levels; set reasonable stops near important levels; beware of false breakouts, wait for confirmation before acting; combine with other technical indicators and market environment for comprehensive judgment; note that major economic data releases may invalidate support/resistance.
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