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Support and resistance levels are basically historical prices where a large number of orders accumulate to prevent a prevailing trend from continuing. Think for a second, if the EUR/USD has risen to 1.1100 and there is a huge volume of sell orders placed at 1.1100, and if the volume of sell orders equals the volume of buy orders, then the price will find an equilibrium. If there are more sellers than buyers, the price will not only stop going up, soon the market price might turn and start a bearish retracement, right? This is what happened in the scenario below.

 

If there are any time-tested method of trading Forex is finding pivot zones in a price chart and planning your trades around these levels. When a pivot level restricts bulls (buyers) from pushing the price further up, it is known as resistance and if the price is having difficulty crossing below a pivot level, it is called a support. What you need to note down is that a pivot level can act as both support and resistance...


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