Resistors and supports provide the trader with orientation marks. There are two strategies for trading: the action of outbreaks. Either resistance is exceeded or support is exceeded. After a resistance is exceeded, there is often a strong price movement. Many traders try to benefit from this. Other traders, in turn, speculate that the course bounces back from support or resistance. Since in everyday life it often comes to so-called false outbreaks, in which the course breaks through the resistance, but ultimately does not continue to rise sustainably, it is offered to wait for the so-called re-test of the line from the opposite side. This is how you can be sure that the resistance has actually been overcome in the long term.
Getting on and off properly
For the right entry and exit, investors have to follow trend breaks closely. If the course breaks a long-term trend, it can be a sign of an impending trend change. It is therefore important to pay attention to the fact that long-term trend lines are violated. However, it is important to note that not every breakthrough must also lead to a change in the trend. The principle is that a closing price on a weekly basis is more significant than on a daily basis and that an intra-intraday injury is less serious than a closing price basis. Some traders, as filters, also use certain course or time periods to distinguish a breakthrough from a false signal. In addition to breaking a trend line, trend changes can also be heralded by reversal formations. A precondition for a reversal formation is the existence of a trend. One of the most important formations is the double floor. This formation is also known as the W formation and occurs at the end of a bear market. However, a double floor is only completed when the course rises above the intermediate level of the formation. In contrast, the double high or the M formation announces the end of a house. In the case of a double high, the lowering of the intermediate depth triggers the sales signal. In addition, there is the head-and-shoulders formation and the three-fold floor or-highly further formations that point to the end of an existing trend. Such chart formations occur at all time levels. They can also be traded on a minute basis without any problems! The difficulty of anticipating a certain price development is often for beginners that they usually only have completed chart images in mind and do not yet recognize the beginning of a formation as such. This is why the chart technique is particularly important: practice makes the Master and the successful (forex) trader.