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1 Price Action Supported by Technicals on 30th September 2013, 3:42 pm

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Let's start this section with a quick reminder of a previous lesson from Module 3: support and resistance levels are those levels where the exchange rate experiences upward or downward pressure. A support level is usually a low point in any displayed chart pattern, whereas a resistance level is a peak point in the chart. These points are identified as support and resistance when they show a tendency to reappear.
Once these levels are broken, they tend to become the opposite obstacle. Thus, in a rising market, a resistance level that is broken could serve as a support for the upward trend; whereas in a falling market, once a support level is broken, it could turn into a resistance.
Before we go on with technical indicators, we have to keep in mind that most technical indicators boil down to price, as they are simply an equation or formula that is applied to the price.
A moving average is a good example, as it consists of the average - or mean price - of a trading vehicle over a designated period of time. Oscillators, such as stochastic or RSI, measure the difference between the current price and recent prices to determine if a currency pair is overbought or oversold.
Raw price information is thus of utmost importance for traders because unlike most indicators, support and resistance levels tell us where the buyers and sellers have set up camp. In fact, many of the large market players, like hedge funds and market maker banks, forecast price movements and plan their positions by looking primarily at raw market-generated data, that is, price action.
In this regard, indicators should serve as means to confirm what price action is signaling as evident. Let's see some ways of measuring the strength of supply and demand with the help of technical indicators.


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