31 December 2018

Support vs Resistance in Online Currency Trading

Consider resistance. This can be seen generated by a range of factors. In particular it can be seen as a consequence of value levels. Typically a currency pair will retrace when it hits a big figure. Thus resistance can be seen as a generator of retracements.
While resistance is a horizontal move it differs from other kinds of horizontal moves, for example moves related to a reduction in volatility, for instance after a market closes. But like these moves it has the capacity to generate directional moves. But a directional move from a flatlining low volatility move can be seen as something beginning, or something happening and perhaps disappearing.
But a directional move from resistance can be seen as a move with inherent volatility which has an attractor, that is the move can be pulled back to it, generating retracements. So resistance is something as might be expected to be overcome, low volatility horizontal moves can be seen as something to be changed. However resistance itself has an inherent potential to be changed as well. That is, to be overcome.
However in a sense it may not be overcome, as resistance lingers as a structure or marker in the market. When the pair returns to that value, it may respect it again. Or it may not. Why it may not may perhaps be a consequence of the extent to which the pair did indeed escape from it at the time. For it can be seen that past resistance can be ignored by a pair. So one can ask is the pair deconstructing resistance in such as way as the attractor is deconstructed or is it just putting it aside, perhaps temporarily.
So resistance can be seen in the context of multiple past resistance. Perhaps the pair can work repeatedly on resistance, over time, to deconstruct it. And indeed such a way of dealing with value, is what happens in a chart over time. What is described as the market changes, expressed in moves traced out on the chart. Hard wired value levels may be impossible to deconstruct, always remaining an attractor, but not necessarily one which will inherently trap a pair, given such factors as inputs into the market volatility and so on.
An interesting question is do these comments equally apply to support, or is there an asymmetry in the market which results in different behavior around support. That is support may be something which has a tendency not to hold, a kind of instability built into it, yet certain market conditions may help shore up this support, as it were. This may be a consequence of trader or computer program behavior.
This raises an interesting question of the difference between trader and computer behavior. While both will be following algorithms or rules, the computers certainly will be, the human traders may try to. But those rules or algorithms may be founded in human-centric market behavior, which sees support and resistance in real world terms, perhaps going down to the different ways they are understood as words reflecting activity in the real world. However the market is not the real world, and this fact may tend to create the uncertainty which attaches to support and resistance as a pair comes back to it again.