What You Should Know about Support and Resistance

What is Support and Resistance?

Support and resistance are the guiding principles of technical analysis. When buyers talk about support and resistance, they’re referring to the two rate zones or demand and support on a chart that prevents the price of assets from moving in one direction or the other.

What is Support?

Support, also known as a support level, is the price level below which an asset does not fall for an extended period of time. Support levels can be drawn in technical analysis by drawing a line along the lowest lows. More advanced variations of support can be identified using other technical indicators and charting approaches.

What is Resistance?

The point at which prices stop rising is referred to as resistance. On the chart, it’s also known as the “maximum supply” level. As the price approaches resistance, sellers are more likely to sell and buyers are less likely to buy, according to the logic. Prices begin to fall when they reach the resistance level, and when they break through, they continue to increase. Resistance is one of the most important tools that traders look at when the market is rising. It’s regularly utilized as a trigger for sales.

Why are support and resistance levels important?

Support and resistance levels are used by traders to decide when to enter and exit the markets. When price movement on a chart breaks through support levels, it is seen as a buying or selling opportunity. The breach occurs during an uptrend, and it could even signal a reversal. Traders can also make accurate predictions when prices move in extreme directions. These indicators are quite valuable as trading tools since they may help you determine the best moments to buy or sell financial or currency assets.

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