![]() The forex strategy example below shows how a high from the previous day in the AUD/USD currency pair ended up being the place where the market twice ran out of steam the following morning. If we are looking to sell short when a market starts to falter near a previous high, then many traders will place a stop loss above that previous high. For instance, if we are looking for a bounce off a level, our stop loss can go below that previous low point. Such strategies, based on previous highs and lows on a chart, can make risk management relatively straightforward for any trader. We are looking for the forex pair to ‘run out of steam’ near that previous high and then go short and sell to try and profit from a slide in price. ![]() This forex trading strategy mirrors the bounce strategy. ![]() If a market is appreciating but then suddenly falls, the overall view is likely to be that the price is getting too expensive. The resistance level is a point where the market turned from its previous peak and headed back down. Similar to analysing support levels, forex traders also analyse resistance levels.
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