Technical analysis uses graphs to try to predict how prices will evolve based on past price movements. Using this technique, the trader can process multiple currency pairs at the same time. From experience, we see that it is precisely because so many traders use technical analysis and that their way of reacting on the markets follows these principles that technical analysis works. It is a true self-fulfilling prophecy that is taking place, which increases the reliability of the signals generated by this analysis.
Supports and resistances
- The most effective and therefore best known technical analysis parameter is the concept of supports and resistances. A support is a “floor”, a low border that the price of a pair has difficulty crossing. Resistance is the opposite: a high limit that prices have a hard time crossing. With 24Option you can find the best choices now.
- It is appropriate to use supports and resistances when prices are moving in a price corridor. They then make it possible to say when the market will change direction. If prices exceed these limits, this is called a “breakout” and this event is generally followed by a period of increased activity on the markets.
Use supports and resistors
There are several ways to use supports and resistors. A trader who favors pairs for which prices are moving in “corridors” will buy above the supports and sell just below the resistance during breakouts. Traders who follow trends, on the contrary, will buy when prices go above resistance or under support.
The objective remains the same. We will buy if we anticipate an increase in the price of this pair. You can also sell if you think the rate will drop in order to buy the pair at a lower price in the future.