Trade Forex Trading

Support & Resistance Areas

This is one of most widely used concepts in gold trading and it refers to levels on a chart that tend to act as barriers that prevent the price of an asset from getting pushed beyond a particular point in a certain direction.

Support

This level stops the price of an asset from getting pushed downwards & therefore it's regarded as a floor because it halts the market from moving downwards past a certain point.

Example:

On the example shown below you as a trader can see that price moved down until it hit a support

Once the price hit this technical level it slightly bounced back up, then resumed going downward until it hit the support again.

The process of hitting a level and bouncing back is termed as testing the support.

The more times a support is tested and the market bounces up the stronger it is - the example shown below this level was tested three times without breaking. Finally the market trend reversed & started heading in in the in the opposite market trend market trend trend market trend trend market trend trend direction.

Once this level has been determined traders use it to place their orders to buy the at the same time putting a stop loss a few pips below it.

XAUUSD Chart Support & Resistance Levels Example

In the example set-out above the market did not move below this area. It is an area where the price can't break lower.

These regions form good points where the price trend in a downwards trend is likely to reverse & get support & start heading upwards.

The demand to buy the at this point will be greater and therefore providing a good point to begin a buy trade, while placing stops some pips just below.

This support is also use by short xauusd sellers as a target where to set their take profit for their short sell trades.

This is another reason why the price trend is likely to reverse or consolidate at this particular point because once the sellers close their sell trades then energy of the downward trend reduces and a consolidation will happen after which the trend direction is likely to reverse.

Resistance

This level stops the price of an asset from getting pushed upward these levels are hence regarded as a ceiling because these technical levels prohibit the market from heading upwards

Example:

On the example shown below you as a trader can see that price moved up until it hit a resistance.

Once the price hit this technical level it retraced slightly then resumed heading up until it hit the resistance level again.

The resistance holds & is tried and tested for 5 times without breaking.

The more times a resistance area is tested the stronger the it is.

Once this level has been determined traders put their orders to sell at this level and at the same time putting a stop loss a few pips above it.

Resistance levels on a gold Chart

In the example above the market did not move above this area. This region shows an area where the price can not break above.

These levels form good points where a price in an upwards trend is likely to reverse after some resistance & begin moving downward in in the in the opposite market trend market trend trend market trend market trend trend market trend direction.

This portrays that the demand to sell the at this region will be greater & therefore providing a good point to start a sell trade, while placing stop losses some pips just above this technical level.

This resistance zone is also used by the buyers as a target where to set and place their take-profits for their bullish trades. T

His is another reason why the price trend is likely to reverse at this specific level because once the buyers buyers close out their sell their buy trades then momentum of the upward trend reduces and a consolidation will happen after which the direction is likely to reverse & begin moving down.

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