Support and resistance indicators are a factor of extreme importance in the world of trading, hence they are established as essential factors in technical analysis.
At support and resistance levels, the price will take on another trend (the opposite of what it was doing), due to the competition between supply and demand. Now you will understand!
Support is a price that is below the current (declining) price and usually coincides with a previous low on the chart. When there is support, it is normal that the purchase exceeds the sale due to the decrease in price and, therefore, it increases again.
In resistance the opposite happens; an uptrend price stops and starts to decline (usually coinciding with a previous peak on the charts). When there is resistance, it is usual for the sale price to exceed the purchase price, in this way it will change its trend and begin to decline.
This is a psychological factor, as it is the traders who trade at these levels and help to intensify support and resistance levels.
It is worth remembering that the difference between support and resistance is virtual: Both are the same thing, except that the supports are below the current price and the resistances are above.
Needless to say, once resistance is overcome, it becomes support, since it goes below the price. The same thing happens the other way around. If support is broken, it will become resistance as it is now above the last price.
To guess the direction that the price will take
The price will tend to move without hesitation between support and resistance, slowing down when approaching one of these and, sometimes, bouncing when arriving and not being able to cross the barrier. This alone is already a key consideration to take into account when considering operations.
To determine where to place your security stop
If we know that the safety stop has to be placed where we do not expect the price to arrive, it makes all the sense in the world that we hide it behind support or resistance.
For example, if we go long, we will put a safety stop at some point below the current price. If we place our stop just below the nearest support, we will be placing it in an area where it will be hit with a very low probability. In other words, only when we have made a mistake with the direction of the price in such a way that it has been able to pierce the support, will our stop loss be triggered.
To know how far we have to wait before entering a position
You may want to buy Exxon Mobil stock as a long-term investment. However, it is always a good idea to wait for the price to approach its local low. Sooner or later the price will approach significant support and there you will have your opportunity to buy cheap.
Lite Forex is a registered Forex broker in the Marshall Islands that has been operating since 2005. On its own, it was the first broker to break with well-established industry practices regarding capital entry thresholds and introduce cent accounts with a deposit of only $1 minimum. This was quite a revolutionary step, duplicated by other brokers since then, and allowed millions of new traders to get acquainted with Forex trading on a live trading account with a minimum deposit. It also made the world’s most liquid financial market accessible to countless emerging market traders with deposits of less than $100. The UK-based financial magazine World Finance included Lite Forex in its list of the 100 world finances. Over the last fifteen years,
Regulation and Security
Lite Forex Investments Limited, the corporate owner of Lite Forex, has been registered in the Marshall Islands as a corporation since September 2013. Although it complies with the Marshall Islands Business Company Act, this broker remains an unregulated entity, which is part of what allows it to offer services that many regulated brokers cannot offer. However, it also does not offer the protections that regulated brokers can offer.
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Swap rates apply on overnight positions, and corporate actions such as dividends, splits, and mergers affect CFDs on shares and indices. All affected portfolios are adjusted accordingly. Lite Forex remains transparent about the pricing environment and maintains a file of average spreads that is updated weekly. The client agreement states that there are no inactivity fees, which most brokers do, and Lite Forex waives all deposit and withdrawal fees. Although several assets appear to be overpriced, the overall cost structure remains acceptable. Traders can also view a library of the broker’s past spreads, which is quite a nice offering.
Visit this site for more information: Lite Forex Review
What can I trade?
Traders have access to 56 currency pairs, six commodities, 16 cryptocurrencies, 37 CFDs on US-listed shares, and eleven CFDs on indices. The overall selection of 126 is suitable for new retail traders but unsuitable for more advanced ones. While the home page advertises over 145 assets, the full list of assets was not apparent during our Lite Forex review. However, Lite Forex is continually expanding its tradable assets and is expected to continue to offer its clients wider access to financial instruments.