The so-called resistance line means that when the exchange rate rises to a certain height, a large number of selling supplies or weak buying orders appear, which hinders the exchange rate from continuing to rise. The support line means that when the exchange rate falls to a certain height, the buying gas turns stronger, the selling gas turns weaker and the exchange rate stops falling. From the perspective of supply and demand, "support" stands for centralized demand and "boycott" stands for centralized supply. Changes in the relationship between supply and demand in the foreign exchange market have limited exchange rate changes.
Resistance line and support line are both important methods of graphic analysis. Generally speaking, if the exchange rate fluctuates up and down in a certain area, and the cumulative turnover in this area is extremely large, then the exchange rate will naturally become a support line or a resistance line if it crosses or falls below this area. These prices, which used to trade too much, often change from resistance line to support line, or from support line to resistance line: once they cross the resistance line, they will become the support line for the next decline; Once the support line falls below, it will become the resistance line for the next round of rebound.
First, the principle and application of support line
On the K-line chart, as long as the lowest price appears many times in the same small interval, two identical lowest prices are connected and extended to form a support line, which vividly describes the unbalanced state that demand exceeds supply in a certain price interval. When the transaction price falls into this range, the seller refuses to sell because of the great increase in buying gas, which makes the price turn around and pick up. Its inherent essence is:
Due to the repeated appearance of this price range in the previous stage, a large volume of transactions has been accumulated. When the market moves closer to the support line from top to bottom, the short sellers have cleared their profit chips, and there are no more chips to suppress short selling. People who do more use low money to absorb and form demand; The indecisive person has been trapped, and the chip lock is not easy to cut the position. Therefore, in this price range, supply is less than demand, which naturally forms a strong supporting foundation. In addition, because the market has turned back here many times, it has also established the price range of investors' psychological support. As long as there is no particularly bad news, the market will rebound.
Technical analysis defines the price range with large cumulative turnover as "transaction intensive area", that is, there is a high turnover rate in this intensive area. In order to make a profit, buyers in dense areas need to wait until the exchange rate rises above this cost range. These buyers are all chip holders. As long as they do not lose confidence in the future, they will not throw chips in this price range. It is difficult for the market to fall below this price because the chip holders are reluctant to sell. On the other hand, due to intensive transactions, the amount of money held by the empty side increased, and the chips in the hands were exhausted, that is, the supply of chips in the market shrank. Although some people who lose confidence in the future will still throw chips, it will not become a climate. Even if the support line is temporarily broken, as long as there is neither the cooperation of trading volume nor all kinds of bad news, the price will return to the top of the support line and the psychological support of investors will be enhanced again.