Support and Resistance
Support and resistance are terms used in the financial markets to refer to price levels on charts that tend to act as barriers, preventing the price of an asset from getting pushed in a certain direction. Support is the price level at which demand is thought to be strong enough to prevent the price from declining further. Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.
History of Support and Resistance
The concept of support and resistance has been around for centuries, with traders and investors using it to identify potential entry and exit points in the markets. The idea is that when the price of an asset reaches a certain level, it will either be supported by buyers or resisted by sellers. This can create a “floor” or “ceiling” for the price of the asset, which can be used to identify potential trading opportunities.
Support and resistance levels are often used in technical analysis, which is the study of past price movements in order to identify potential future price movements. Technical analysts use support and resistance levels to identify potential entry and exit points in the markets, as well as to identify potential trends. Technical analysts also use support and resistance levels to identify potential areas of consolidation, which can be used to identify potential breakouts.
Comparison Table
| Support | Resistance |
|---|---|
| Price level at which demand is thought to be strong enough to prevent the price from declining further. | Price level at which selling is thought to be strong enough to prevent the price from rising further. |
| Creates a “floor” for the price of the asset. | Creates a “ceiling” for the price of the asset. |
| Used to identify potential entry points in the markets. | Used to identify potential exit points in the markets. |
Summary
Support and resistance are terms used in the financial markets to refer to price levels on charts that tend to act as barriers, preventing the price of an asset from getting pushed in a certain direction. Support is the price level at which demand is thought to be strong enough to prevent the price from declining further, while resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further. Support and resistance levels are often used in technical analysis to identify potential entry and exit points in the markets, as well as to identify potential trends and areas of consolidation.
For more information about support and resistance, you can visit Investopedia, The Balance, and Investing.com.
See Also
- Trendlines
- Moving Averages
- Price Action
- Relative Strength Index (RSI)
- Bollinger Bands
- Fibonacci Retracements
- Stochastic Oscillator
- MACD
- Volume
- Candlestick Patterns
