It could be said that nothing remains in the same condition forever, and no trend in the forex market can run indefinitely. This applies to both bearish markets as well as the bullish market, so the implications here apply to all market conditions. Even new traders or those that have never even seen a trading platform can understand this phenomenon. Trading in a bullish market is very easy as traders know that market is going up. With buy positions, there is a much reduced chance of loss but sometimes even bull markets can cause a huge loss for traders.
Some traders will find a market to be bullish they just jump into a buy position without considering the potential for market declines. When a bullish market is trending and prices are going up, a point comes when this rise finds forex resistance and this simply means that prices are about to fall back and start to decline.
Forex Trend Changes at Resistance
Resistance is simplified as being a market condition where increasing prices stop a trend and start to go in opposite direction. This point is more often forecasted by proactive traders to avoid any new risk coming their way. In cases where the resistance point is reached but prices are still penetrating through the upper level and are rising even higher, then it will be hard for the market to stop until another resistance level occurs.
Forex Resistance is a very important analytic tool used for minimizing the risk and making more better potential for profit by reacting in an appropriate manner. When experienced traders find that prices are going up, they start to find a resistance point for those prices. Eventually, the point where the increase in price slows traders can expect values to start dropping. This will continue until a support level is reached.
Conclusion: Resistance Is A Forecasting Tool
The purpose of finding such points of resistance is to understand where one must stop buying and start selling the asset. At this point, a trader is in a position to get more speculative profits.It is true that not everyone is able to identify the exact point of resistance, as this is just a forecasting tool. But many of the forex market’s best technicians look for the nearest point from where prices will likely start to fall. This proves the importance of analysis tools like Resistance in the forex trading process.