Today I suggest we discuss basic concepts such as support and resistance levels.
The price of an asset finds a level that it can't break through, and this level acts as a kind of barrier.
🔹In case of support, price finds a lower barrier and in the case of resistance, it finds an upper barrier.
To put it simply, support is a period in which supply and demand levels align.
I.e., it is the level at which traders and investors believe that the price is attractive enough to buy, and as a consequence, they start to buy.
🔹Resistance is the opposite of support.
It's the asset price level at which demand exceeds supply.
This is the barrier because when the asset price reaches a certain level, some people start to sell and potential buyers are not ready to buy at that price.
Technical analysts use support and resistance levels to determine interest on the price chart.
These are levels where a change in direction or a pause in the underlying trend may be more likely.
Market psychology has a huge impact on the support and resistance levels.
Traders and investors know the price levels which have previously increased interest and activity.
This often makes support and resistance areas ideal for whales to enter or exit a position.
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