Support and Resistance Explained
[Source – centerpointsecurities.com] Support and resistance are basic concepts in technical analysis that can help traders identify potential price levels where the direction of market movement can be held back or possibly reversed. However, before we can apply these concepts, it’s essential to understand their definitions and types. Support refers to a price level or area at the bottom of a chart that can withstand further price declines. This level often forms based on historical data, and when the price approaches this area again, it can trigger market reactions. Resistance is the opposite of support. It is an area at the top of a chart that can prevent the price from rising further. Characteristics of support resistance Since these levels act as barriers to price movement, they exhibit specific characteristics when touched or broken. Some key characteristics include: Support and resistance levels that are touched for the first time te...