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Support & Resistance: Rates of Incline and Decline
Monday, 20 November 2006 18:51:27 GMT  |  Adam Rosen, FX Power Course Instructor
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Every trader ponders the question at one time or another, will the market reverse direction now, or is this consolidation simply a pause on its way lower / higher? As the market attempts to change course, there are a number of symptoms that at times may not be very easy to spot.

One such sign is the behavior of our short-term support and resistance lines as they emerge. For example, resistance lines (shown below) that connect extreme high prices show the markets’ strength (to the downside) over a given period of time. The faster the rate of decline, the steeper the line appears. As the market reverses direction from the downside to the upside, the buyers are slower gaining control as the sellers are not able to send the market lower at the same rate. As capital begins to move from one side to the other, we may expect not only our resistance lines to decrease in their grade, but also the angle of our support lines may increase their rate of incline. This method is somewhat subjective, however we can see by simply connecting extreme highs (in a downtrend) and lows (in an uptrend) we can begin to frame the markets price action into terms we can easily define and act upon.

WeeklyLesson11.20.2006

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