Support is a term we use in forex to define an area that price has failed to push below and usually results in a movement up. With this in mind support is a good are to look for potential buy/long trades.
In order to find high probability areas of support we want to look for a region that has been tested multiple times by price to confirm the validity of this support area.
Let’s take a look at an example of how to use support to predict price movement.
Here we have a chart of GBP/CHF on the 4-hour timeframe. As you can see price found support at our region highlighted in yellow initially then came back to support again before pushing away. And finally retested this support for a 3rd time before our major move. This is a fantastic example of price confirming support as valid and then we can enter at the 3rd touch of support and watch price rally to the upside giving us a profitable trade.
Resistance is the opposite of support. Resistance acts as a ceiling when support acts like a floor and so resistance is an area in which price has failed to push above and results in a further move downwards. Therefore, resistance is a good place to look for sell/short trades.
Again, like support, we are always looking for a resistance to be confirmed by multiple touches before entering a trade.
Now here is an example of how to use resistance to predict price movement.
Here we have USD/CAD on the 4-hour timeframe. Once again, we can see this resistance has been tested previously after initially being found at around the 1.29000 level. Upon our 3rd touch we saw the major push to the downside and this would have been our prime entry point in order to make a good high probability profitable trade.