Hi guys,…I’m now on third grade…still long way to go.
Here goes the explanations I didnt understand,
‘When price pass through a resistance level, that level then becomes a new support’ (the peak point ^ becomes a support??)
What does ‘the stronger/weaker level’ mean? (the stronger the level the higher chance the price goes up?)
Trend line drawn to fit to the market? (???)
Have a nice day! ;)
Help me! plz.
Hello iloveforex
For Question #1
I think that�s the theory of Support and Resistance.
Like in Pipsology�s example, the resistance area on the prior period became the Support because the price had finally passed through a particular zone/level
One of the key concepts of support and resistance is that after a support or resistance level is broken, it shifts direction. In other words, after a support is broken in a move to the downside, it becomes resistance in price attempts to rally. After a resistance level is broken to the upside, it will subsequently act as support for further price gains.
The more the S & R zones were tested, the more they become stronger. The newly formed Support and Resistance levels are the weak ones. The latter would have a greater chance to break out at once.
Hi, iloveforex
I agree with what Czar posted.
Here’s how I would answer your questions.
[B]1.[/B] A resistance level is initially established as a “high” price. It could be a very long-term high, such as a 52-week high. Or, it could be a medium-term high, such as a “swing” high (meaning the high price marking the end of a long uptrend). Or, it could be yesterday’s high. Or, it could be an intraday high. Some highs are important as resistance levels, and some are not. One of your tasks, as a student of forex, is to train your eye to identify the important highs, which will represent future resistance levels.
When a significant high price establishes a resistance level, that level is marked by a horizontal line extending to the right of that high price. That line may be important for hours, days, weeks, or months into the future. A resistance level (line) can even be important for years — and, theoretically, forever — for instance, an all-time high. Since the beginning of the retail forex market (1993), the all-time high for the USD/JPY is 147.66, set 11 years ago, in August 1998. If the USD/JPY were to rise above the 140.00 area, that all-time high would be viewed by traders as a MAJOR resistance level.
When a resistance level is broken (not just probed, or tested), that level (line) becomes future support. And, similarly, when a support level is broken, that level (line) becomes future resistance.
Why should this occur? It’s human nature. When a price approaches a level where it struggled previously, many traders pull in their horns. If they have a long position, as price approaches a resistance level, they may choose to take profits (which means sell) in order to avoid the added risk in the area of that resistance level. Their selling (taking their profits) contributes to the resistance that the price encounters as it approaches that resistance level. In other words, traders believe that resistance will be encountered at that level; they act accordingly; and their actions make their belief a self-fulfilling prophesy.
[B]2.[/B] Some resistance levels are strong because they have lasted a long time, whether they have been tested or not. For instance, an all-time high is very strong, even it the price never attempted to exceed that level. Other resistance levels are strong because they have been tested again and again, and have held (that is, the price failed to break that resistance level).
On the other hand, some resistance levels are weak because they are very short-term, or because they are very close to a strong resistance level, or because the price has crossed back and forth across that resistance level without pausing.
We expect that a rising price will be stopped, and forced to retrace, by a strong resistance level. But, the market doesn’t care about our expectations, and will do whatever it wants to do. So, sometimes, a “strong” resistance level gets passed as if it weren’t even there. But, most of the time, when a price approaches a strong resistance level, it is stopped, just as we expected.
Support levels function in exactly the same way, just in the opposite direction.
[B]3.[/B] I don’t know what your question #3 means. If you’re asking how to draw trendlines, go back and study BabyPips Grade 2 again. I think it’s pretty well explained there, in words and diagrams.
I hope this helps you.
After you re-study Second Grade, if you’re still having problems, post your questions here.
Clint
From Pipsology:
Unfortunately, most traders don’t draw them correctly or they try to make the line fit the market instead of the other way around.
In my understanding in this line, some traders are having a hard time because they are trying to adjust the market to fit their analysis – instead of “traders adjusting to the market”.
Thanks Mr. Clint :o
My broker ACM has an educational section in their web site and has a good explanation about resistances and support levels with an example:
Forex Education | New to Forex
Hope it helps!
Thank you so…much…
Thanks alot!!!
Yep!!
Keep asking the questions!!
Thats what we are here for!!