Make Money On Forex with Support and Resistance Lines

I often write about the Forex market and how to get an edge in regards to trading on a regular basis. One of my favorite topics is based on how to use indicators successfully so that you can get that edge in the Forex market. I must admit however that my favorite indicator is the old reliable support and resistance lines. This indicator goes back as far as I can remember in one fashion or another and I think that it still has staying power speaks to the effectiveness of this trading tool.

There are plenty of Forex traders that depend on so-called market predicting tools like neural nets or algorithms. As far as I am concerned they can have these tools and leave me with good old fashioned support and resistance lines.

The best way to describe a support and resistance line is a certain level of price exchange rate level in which the market has hit this level and later pulled back in the other direction. Here is a good way to remember which is which: Support lines are on the bottom while resistance lines are on the top.

So why is this method so effective? This is a good question but it would help if we went back to why the Forex moves at all. The answer to this is obvious: Traders move the markets. The random population of traders consist of individuals, corporations, Central Banks, and hedge funds. On a technical level, there are exchange rate values (emotionally charged) that can make very nice support and resistance lines.

As a result of the fact that we run on a base-10 number system, these emotionally-packed values are the round numbers. The bottom line is that support and resistance lines are simply exchange rate values that are considered by many traders to be critical points that are traded on. The way to make money on this is to know what side to be on as demonstrated by the support and resistance.

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Cal Relerd has been involved in the Forex market and investment world for many years. He is a firm believer in the Forex market being one of the greatest and most accessible means to building substantial capital in a relatively short period of time.

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