Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Support level definition

A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.

Usually, the markets prove unwilling to let an asset drop below its support level, with buyers stepping in to raise the asset’s price higher again. That makes them the opposite of resistance levels: the point at which the markets prove unwilling to let an asset’s price rise any higher.

If an asset does move below its support level, then that support level is either wiped out – and a new support level must be identified – or reconfirmed, if lots of traders buy the asset.

Knowing where an asset’s support and resistance levels are can help traders choose the best time to enter a market, as well as where to put stops and limits.

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