The support and resistance level as shown in figure 6 is a widely use concept in Forex trading. The peaks represent the price levels where the selling pressure exceeds the buying pressure and they are known as resistance levels.
The troughs, on the other hand, represent the levels where buying pressure exceeds the selling pressure and they are known as support levels. A strong resistance level turns into a strong support level after it is penetrated and vice versa.
Trendlines and channels
The idea of trend is principal to technical analysis. A trend shows the direction of the market. The technical analysis is all about predicting the trend of the market. A trendline is the natural development in tracking a trend. Trendline is a straight line that connects the major peaks or the major troughs.
Thus, a trend can be notice in the chart. The trendlines are classified as: up trendlines, down trendlines, and sideways trendlines.
A channel is created by sketch a parallel line that connecting the significant peaks in an uptrend and the significant troughs in a downtrend. The channel line then creates a channel which borders the currency trend. When prices hit the bottom side of the channel, this may be a good buying opportunity and reversely if prices hit the upper side.
One of the types of line studies is the Ascending Triangle and it is formed during an uptrend. Besides the ascending triangle, other line studies that available in Forex are Descending Triangle, Symmetrical Triangle, Head and Shoulder, Pivot Point, Fibonacci Retracement, and many more.
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