This is a basic trading concept which can be used both when trading Forex and other types of financial products. Essentially, it means that often the market will expand and contract to a fairly similar extent; the price will go up until supply outweighs demand, at which point – the point of resistance – the price will fall. It will fall until the point where demand outweighs supply, at which point – the point of support – the price will rise. Previous chart data can be analysed for general indications as to resistance and support levels by looking at the peaks and troughs.
However, this strategy is easier to implement in periods of low volatility; on the other hand, when markets are moving rapidly – for example, in the wake of a significant economic announcement – it becomes harder to calculate future peaks and troughs based on previous data.