Part3
Support Levels
A price support level is a specific level on the chart, which the price tests while it is decreasing. In this manner, supports are located below the price action. If the price meets a support on its way down, there is a good chance that the price will bounce off in a bullish direction.
On the other hand, if the price breaks a crucial support area on the chart, then we expect the decrease to continue to the next lower level of price support.
Imagine you are in a short trade in the EUR/USD and the pair is decreasing in your favor. Suddenly, the price meets an old support level, which has been tested and has held on prior attempts.
In this case, the respective support level would be a good exit point. You would close your trade in anticipation of a minor or major reversal off the support zone.
Now imagine instead, the price breaks that support. In this case, assuming that your bias is still to the downside, You can reopen your trade in order to catch an eventual further price decrease. 2 replies
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