Using Forex trading price action support and resistance has become popular with many traders.
This type of Forex trading system can be long or short-term in nature depending on the trader’s preferences.
A Forex trading support level is one which traders expect to form a floor for Forex prices and “support” them. A Forex trading resistance level forms a ceiling which displays “resistance” to Forex prices going through it.
When a Forex market’s prices stay within the boundaries of support and resistance it is said to be trading “in a range” or described as being “rangebound”. This can also be described and a non-trending Forex market. It is estimated that many markets trade in a range as much as 70% of the time.
A “breakout” occurs when a Forex market’s prices penetrates either the ceiling of resistance or the floor of support. At this point the Forex prices have “broken out” of the “channel” formed by the support and resistance levels.
At the point in which the “breakout” is confirmed the market is then said to be “trending”.
Many trader rely on “breakout” analysis to allow them to enter a market trends. This type of Forex trader is often called a “trend follower”.
