In Forex trading, SBR stands for Support become Resistance. This is a key concept in technical analysis.
Understanding Support Become Resistance (SBR)
Based on the provided terms, SBR = Support become Resistance. This describes a situation in price action where a previously established support level is broken by falling prices and subsequently acts as a resistance level when prices attempt to rise back towards it.
- Support (Up Arrow): According to the reference, an Up Arrow signifies Support. A support level is a price point or zone where falling prices tend to pause and reverse upwards, as buying interest outweighs selling pressure. Think of it as a "floor" for prices.
- Resistance: A resistance level is the opposite – a price point or zone where rising prices tend to pause and reverse downwards, as selling pressure outweighs buying interest. This is a "ceiling" for prices.
When price breaks below a support level, that level often "flips" roles. The area that previously prevented price from falling further now tends to prevent price from rising higher. This phenomenon is known as Support Become Resistance (SBR).
The Logic Behind SBR
The SBR principle is rooted in market psychology and the behavior of traders:
- Broken Support: When price falls below a support level, traders who bought at or near that support might feel regret and look to exit their positions if the price returns to that level, limiting upward movement.
- Shifting Expectations: Traders who missed selling at higher prices or who initiated short positions below the support level may see the broken support as a new opportunity to sell, expecting it to now hold as resistance.
- Confirmation: The market remembers previous significant price levels. A level that was strong support, once broken, is often tested as new resistance. A successful test strengthens the belief in its new role.
SBR vs. RBS
It's helpful to compare SBR with its inverse, which is also mentioned in the reference:
| Term | Definition | Description | How it Looks on a Chart |
|---|---|---|---|
| SBR (Support become Resistance) | Support become Resistance | A price level that previously acted as support is broken and then acts as resistance. | Price falls below a support level, then attempts to rise back to it but is rejected. |
| RBS (Resistance become Support) | Resistance become Support | A price level that previously acted as resistance is broken and then acts as support. | Price rises above a resistance level, then attempts to fall back to it but finds support. |
(Note: While the reference defines RBS, the core question is about SBR.)
Practical Applications of SBR in Forex Trading
Traders often use SBR levels as potential areas for:
- Entry Points: Looking for opportunities to enter short (sell) positions when price tests the former support level that is now acting as resistance.
- Exit Points: Traders who were long (bought) might place stop-loss orders below the original support or take profit if price reaches this level and is rejected after it becomes resistance.
- Confirmation: Observing price action around a potential SBR level can help confirm trading ideas based on other indicators or patterns.
Example Scenario:
Imagine a currency pair like EUR/USD found strong support at 1.1000 (signified perhaps by an Up Arrow on a trader's chart). Price bounced several times from this level. Eventually, strong selling pressure drives the price below 1.1000. Later, price starts to recover and rises back towards 1.1000. At this point, traders watch to see if 1.1000, the former support, now holds as resistance (SBR). If price stalls or reverses downwards at 1.1000, it confirms the SBR level.
Identifying SBR Levels
Identifying potential SBR zones involves:
- Historical Price Data: Analyzing charts to find significant support levels where price previously bounced multiple times.
- Breakout: Observing a clear break below the identified support level.
- Retest: Waiting for price to return and test the broken support level from below.
- Confirmation: Looking for signs of resistance, such as price rejection (candlestick patterns like pin bars, engulfing patterns) or decreased momentum at the level.
For more detailed information on identifying key levels, explore resources on charting techniques here. (Note: This is a placeholder hyperlink as no specific link was provided).
Understanding SBR is a fundamental part of technical analysis in Forex, helping traders anticipate potential shifts in market direction based on the dynamic nature of price levels.
