What is Support?
- Support In financial markets is a price level where a downtrend can be expected to pause due to a concentration of demand. Learn how to identify support levels and their significance in trading.
- a support level is a key price point where a security tends to find buying interest, preventing the price from declining further. It acts as a psychological "floor" where the demand is strong enough to halt a downtrend, often leading to a price rebound. Traders use support levels to identify potential entry points and to strategically place stop-loss orders to manage risk.
What is Resistence?
- Resistance is a price level where an uptrend can be expected to pause due to a concentration of supply. This section will explain how to identify resistance levels and their role in trading.
- is a critical price level where selling pressure prevents a security from rising further. It serves as a "ceiling" where the supply outweighs the demand, often causing the price to reverse or consolidate. Traders use resistance levels to determine exit points and to set take-profit orders, making it a vital component in managing profitable trades.
Trading Strategies Using Support & Resistance
Description:
- Buying at Support:Traders look for buying opportunities when the price approaches a support level. This strategy is based on the expectation that the support will hold and the price will rebound.
- Selling at Resistance: Traders look for selling opportunities when the price nears a resistance level. This strategy assumes that resistance will hold, causing the price to pull back or reverse.
- Support Turned Resistance & Vice Versa:When a support level is broken, it can become a new resistance level, and vice versa. Traders watch these levels for potential entry or exit points as the roles reverse.
- Breakout Trading:Traders may enter positions when the price breaks through established support or resistance levels, anticipating that the price will continue in the direction of the breakout.
- Range Trading: In a ranging market, traders use support and resistance levels to buy near support and sell near resistance, profiting from price fluctuations within the range.