How to Determine Support and Resistance
Based on Psychological Level
Usually the psychological level in question can be interpreted as a number that is easy to remember. For example 1.6000, 107.00, and other numbers. Usually these round numbers are often used as a reference in various aspects of forex trading. Traders can also see pending orders piling up quite a lot in the broker. Most will cluster around numbers that are already rounded. This element is just waiting for a break to occur at the right time.
The psychological level that is most often found is a number that ends with two zeros, for example 102.00 or 1.6400. In addition, the psychological level number will be more powerful if it ends with three or four zeros, for example 120.00 or 1.3000
Based on Swing High-Swing Low
The way to determine the next support and resistance is based on the swing high-swing low. Usually this is marked by various highs and lows price levels. The rules in the fragment are as follows:
If the price does not penetrate the highest level, the swing high will act as resistance.
If the price does not penetrate the lowest level, the swing high will become support.
If you pay close attention, usually the price will reverse direction and then return to the swing high or swing low level. The more you reach this level, the stronger the support and resistance levels will be.
Based on Pivot Points
As is well known, pivot points are usually used by traders with lower time frames than usual. The purpose of doing this is to reach the appropriate resistance and support levels. The pivot points that are taken into account usually include the opening and closing prices which still include the daily pivot in it. However, there are also those who use a weekly basis or weekly pivot.
Basically this can also be adjusted to the expectations and accuracy of resistance and support based on lower pivot points. Traders can pay attention and compare this method with psychological levels as discussed earlier. When there is a significant price movement, these pivot levels are usually missed. Meanwhile, traders tend to look more at psychological levels or swing highs and swing lows. Understanding support and resistance in foreign currency trading is important so that traders can make the right decisions. Understand the right indicators so that resistance and support can be determined correctly.
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