then the prices would continue to move in that direction. So if the price reaches the previous support level, then it would be seen as bearish; i.e. the price should continue to fall.
In order to estimate the support and resistance levels, the price charts should be analyzed. Support and resistance levels are decided on the market trends over a period of time. Hence the longer timeframe of the charts analyzed; the better it is to determine the price and support levels. Once the support and resistance levels are determined, the traders could use this to find out when to exit or to enter a transaction.
Investors use moving averages as another tool to make their trading strategies. The simple moving average (SMA) is an indicator of the average price in a given period of time over a specific period of time. These can be plotted on a graph and used by the investors to determine whether the prices have a tendency to rise or to fall. If the prices cross above the SMA, then they keep on rising.
Trading strategies can be used individually as well as in combination. It is better if the investor has several trading tools at his/her disposal, so that an effective use of those can be made. Using many tools in conjunction would help the investor to make better decisions than if only a single tool was to be used.
Each analysis helps to supplement the other. Technical analysis can make fundamental analysis more complete, and vice-versa. A trading strategy would be built up taking several analysis factors into consideration.
The trading strategy would tell when a trader should enter the trade, how many profits to expect and when to exit the trade. This could be very helpful guidelines to the amateur trader, as well as make the decision-making process easier for the professional trader.
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