Support and Resistance

Support and resistance are fundamental concepts in technical analysis. They provide valuable insights for traders, helping them make informed decisions in the market:

  1. Support:

    • Definition: Support is a critical price level where buyers actively enter the market.

    • Function: Buyers increase their demand, preventing further price declines.

    • Strength: At this level, demand outweighs supply.

    • Significance: Support zones indicate potential turning points or areas where price reversals may occur.

  2. Resistance:

    • Definition: Resistance represents a crucial price level where sellers become active.

    • Function: Sellers intensify their supply, preventing further price increases.

    • Strength: At this level, supply surpasses demand.

    • Significance: Resistance levels act as barriers, limiting upward movement.

  3. Identifying Levels:

    • Traders analyze price charts to locate historical support and resistance levels.

    • These levels often coincide with areas where price has previously bounced off or stalled.

    • Anticipating future price movements becomes possible by recognizing these key levels.

In summary, understanding support and resistance empowers traders to navigate the market effectively and seize trading opportunities.

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