However, support and resistance levels especially those based on Fibonacci levels are considered to be leading indicators because they lead the markets in predictable paths. Now, when we say predictable, it does not mean guaranteed. But it can be pretty close.

Resistance is the price level that a currency pair has trouble breaking through to the upside. Resistance level is also known as the ceiling of the currency pair price movement.

Why it is so that majority of the currency traders begin buying and selling at a certain support and resistance levels. There is nothing on the charts that forces these currency traders to do so.

Similarly, at resistance, majority of the currency traders think that currency pair is not favorably priced and has become overpriced. So they consider it as an excellent opportunity to short the pair.

Now, what happens at the support level is that as traders begin to sell the currency pair and take profit, the price of the currency pair drops down. As the price starts to fall, other traders who are interested in buying the currency pair keep on watching how far it will go down.

Most of them have done their calculations as to how far the price level will drop down before they can go long. Past price action tells them that the price offered at the support level is the best price under the present market conditions. So when it reaches that level, most of them start buying and go long.

Infact the concept of support and resistance is central to trading any market like stocks, commodities, futures, options, ETFs, bonds and whatever. You just need to understand that support is the level where buyers are willing to step in and resistance is the level where sellers jump into the market!