If you have been following the lessons till now, you would think that it is easy to make money in the Forex market with the knowledge you now have.
While that is true, there are several nuisances in the market that you need to understand in order to avoid certain pitfalls, the biggest amongst which is, support and resistance.
Support and Resistance
Support and resistance are areas in the chart, where the price is most likely to reverse. Support and resistance often form around consolidations.
What is a consolidation? A consolidation is when price forms closer to each other over several hours, often in what we term channels.
When the price is in a downtrend, the consolidation below is called a support, and when the price is in an uptrend, the consolidation above is called resistance.
Again, notice that price would often reverse or delay before a possible break out happens, this is what makes support and resistance levels very important.
Remember the trend reversal points we have discussed in prior lessons? should they happen at a point where there is no support or resistance, chances are that they are fake.
If you trade candlesticks alone without support and resistance, chances are that you would lose terribly in the market.