Technical analysis of foreign exchange trading is an indispensable part of foreign exchange trading. The support and resistance levels of the foreign exchange K-line chart are one of the most commonly used tools when analyzing foreign exchange trends using technical aspects. So how to quickly determine the support and resistance levels and apply them to actual foreign exchange transactions?
Technical analysis of foreign exchange trading is an essential part of conducting foreign exchange trading. In the process of using technical analysis to analyze trends, the most commonly used ones are the support and resistance levels of the foreign exchange K-line chart. How can we quickly determine the support and resistance levels and apply them to actual foreign exchange trading?
1、 The basic principles of support and resistance levels for foreign exchange trading:
The resistance and support in foreign exchange trading technology analysis are actually influenced by the long short relationship in the foreign exchange market. During the price rise process, as the short market gradually becomes larger than the long market, which affects the continued rise of foreign exchange prices, resistance is formed; During the process of foreign exchange price decline, as the price decreases, the long market gradually becomes more bearish, forming an upward supporting force.
Support level: Support level refers to the price level at which support may be encountered during a price decline, thereby stopping the decline and stabilizing the price
Resistance level (also known as pressure level): refers to the situation where prices stop rising or even fall when they rise near a certain price level.
2、 Common methods for determining foreign exchange support and resistance levels:
The moving average has two main functions in foreign exchange trading technology analysis: one is to indicate direction; Another is to provide a basis for determining support and resistance levels. Because the moving average is the average of the closing prices of multiple days, it has a corresponding support and pressure effect on the fluctuations of the exchange rate. When the exchange rate rebounds near the moving average, foreign exchange traders often take the bottom and rebound, thus forming obvious support there.
However, when using the moving average to analyze short-term support resistance, it is generally necessary to adhere to the principle of large period small moving average and small period large moving average. For example, when looking at daily averages, we usually focus on the resistance of the moving averages on the 5th, 10th, and 20th. If it is a 60 minute chart or a 15 minute chart, it usually looks at the moving average of 100200 cycles.
2. Bollinger Line
Judging the resistance level of foreign exchange support through the Bollinger Line is usually done by observing the upper, middle, and lower tracks.
Generally speaking, foreign exchange technology analysis shows that the Bollinger Line is in a flat stage with relatively small changes. At this time, the support and resistance levels are relatively stable, and it is also the best time for high selling and low buying operations. However, investors should also pay attention to setting a stop loss to prevent breakouts when the Bollinger Line is flat.
In addition, when using Bollinger lines for judgment, it is important to choose as many cycles as possible, such as 55 cycles or even 100 cycles of Bollinger lines.
3. Golden Section
The golden section is the most common and effective way to find support and resistance levels in foreign exchange trading.
As long as you open the trend chart and use the golden section index to connect two relative high and low points over a period of time, using the low point as the base point. Based on the corresponding points of each golden section line, you can determine the support point of the price. The judgment of pressure level is based on the relative high point.
Among them, the golden section gears of 38.2%, 61.8%, and 50% are the most important.
3、 Key points of operation:
Firstly, it should be clarified that the resistance level in foreign exchange trading does not necessarily have to be short, and the support level does not necessarily have to be long. Everything depends on the specific situation.
For aggressive investors who want to go long at a support level, it is best to adopt a batch entry approach and give it a try first. If the judgment is correct, increase the position after obtaining profits. If it is wrong, you can supplement the position at the next support position. But remember, you can only cover your position once, otherwise once the trend turns short, it will cause significant losses.
For stable foreign exchange investors, it is best to wait for the following trends before entering the market:
1. From the perspective of the K-line, it is necessary to wait for the appearance of a cross star, bullish engulfment, penetration, and hammerhead before considering entering.
2. From a morphological perspective, it is important to wait for deviations, head and shoulder bottoms, or W-bottoms to appear before considering entry.
3. From the perspective of the trend line, entry is only considered after the downward trend line at a small level breaks through.
In fact, the type of support level and resistance level is similar, and they can change each other. If it falls below the support level, it becomes a resistance level; After the resistance level is effectively breached, it will also become a support level. So we need to pay close attention to this when targeting the foreign exchange market.
【 EBC Platform Risk Reminder and Disclaimer 】: There are risks in the market, and investment needs to be cautious. This article does not constitute investment advice.