Any expert in trading gold online utilizes forex trading support and resistance. Being able to spot these areas on a chart can help make better short-term and long-term decisions, rather than making a knee-jerk reaction to a market spike or plummet. One unique thing about support and resistance is how differently people measure them at times. There isn’t necessarily a right or wrong way to measure support and resistance, but there are some basic tips to be aware of in order to read them properly.
Support and Resistance Basics
If you’re looking at a trading gold website, you’ll likely see some sort of line chart with different patterns. Notice the zigzag pattern on the chart. If the market is trending upward, the gold market will also move up and then come back down slightly.
The highest point of the zigzag is called the resistance. The lowest point on the same line is called the support. On any given chart you look at, you’ll notice resistance and support all over the place, which is normal since the gold market constantly fluctuates on a daily basis.
Broken Support and Resistance
Support and resistance actually aren’t numbers you can pinpoint. Instead, they are considered to be zones or areas to give you an idea of what the market is about to do. A critical mistake people who are new to trading gold make is not looking at the zones from a general point of view. This can lead to knee-jerk reactions for buying or selling, since it looks like a breakout is about to occur. Being able to identify and distinguish a true breakout from just a market fluctuation is a skill that can greatly increase your gold trading account.
Utilize Line Charts
Line charts are generally utilized more than candlestick charts since it is easier to identify breakouts on them. A line chart will give a definitive closing number in the market, rather than just highs and lows. When you have the definitive movement of the markets, you can more easily plot the support and resistance on the chart. This differs from candlestick charts, where you are more likely to plot gold market reflexes, and which can lead to bad trading decisions.
When trading gold online, knowing these small tips can help you avoid making poor decisions based on reflexes. By utilizing line charts and understanding support and resistance zones, you should be set up for increasing your gold trading account over time.