The Forex Trading Course by Abe Cofnas

Author:Abe Cofnas
Language: eng
Format: epub, pdf
ISBN: 9781118998687
Publisher: Wiley
Published: 2015-05-26T00:00:00+00:00

Psychological Support and Resistance

The concept of psychological support and resistance is important to consider because market emotions are an increasingly important force on price action in the age of the Internet. Psychological support reveals itself in several ways and in many ways is a self-reinforcing process. For example, since traders assign importance to key Fibonacci levels, this results in aggregating more significance to those levels. A greater number of parked orders such as stops and limits become located in Fibonacci zones. Option orders at key strike prices play a key role that the average trader in spot has little accessible knowledge of. Additionally, prices at round numbers such as 1.2500 receive more attention from traders. Psychological support emerges when a key support or resistance level, such as a daily, weekly, or monthly high or low, is being probed by the currency pair. In effect, when the price has stopped going higher or lower, whatever the reason, the market considers these resistance and support levels as levels that have to be broken. Therefore, they are psychological in nature.

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