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To really understand the behavior of a currency on the Forex market it is important to see how it has behaved over a period of time. Taken over the course of a very short space of time, it is possible to make data mean just about anything. This, in turn, means that the data will be almost worthless. Over a longer period of time, however, patterns always seem to assert themselves, and establish a firm basis for predicting the future behavior of a currency price. Among the most important figures that appear in a pattern are the support and resistance points.
The point of “support” for any currency is the price level beneath which a currency never trades – effectively its market “bottom”. Whenever the price reaches this level, it almost always bounces back upwards, and for this reason many people will invest when a currency hits that point. Conversely, the “resistance” point is the traditional high point of a currency price, above which it never trades. If you are looking to cash out, this is a good reference point.
Of course, the old saying “there’s a first time for everything” exists for a reason. There will come a time when a currency breaks its support or resistance levels, and this is seen as hugely important. When a currency does this it will be expected to continue this trend, possibly for an extended period of time. It is therefore a good time to get “in” if it is rising or “out” if it is falling.

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It has been said by many experienced traders that Forex is a more volatile market than any of the available options. The theory goes that it is difficult enough to judge a single company’s value at a given time and in the future, just imagine how hard it is to do the same thing with a whole country. This philosophy takes the point of view that analyzing the Forex market relies on careful reading over a period of time.
Some knowledge of world affairs is also advantageous, as it allows you to be aware in advance of the timing of important announcements which can cause market volatility. Others will treat the Forex market exactly like they would treat any other stock market, and take a more technical approach to analyzing their next step. This is not as simple a process in Forex as it is in the stock market, as the Forex is a 24-hour market, and the data-gathering systems require some modification to work effectively on Forex.
Nonetheless, where these methods of technical analysis have been correctly applied, they have proved to be an effective way of making a profit on the Forex market just as their original forms proved on other markets.
While the first method is more of a global, evidence-based approach and the second tends towards techniques and patterns, both have been proven to be successful if correctly applied. It is highly advisable, though, to recognise which one to apply at a given time, as confusion can easily arise around what exactly the data tells you.
Pick the method that you require and use the other to supplement it. That is the only way you can confidently operate in the long term.