In technical analysis, support and resistance levels are prices at which a security’s price tends to experience resistance as it is moving up or support as it is moving down. These levels are based on the idea that prices tend to gravitate towards certain levels, and they can be used to identify potential areas where the price of a security may change direction.
Support levels are prices at which the demand for a security is thought to be strong enough to prevent the price from falling further. This is because buyers are willing to enter the market at these levels, either to take advantage of a perceived bargain or because they believe the security has reached a bottom and is likely to rise in price. When the price of a security falls to a support level and then starts to rise, it is said to have found support.
Resistance levels are prices at which the supply of a security is thought to be large enough to prevent the price from rising further. This is because sellers are willing to enter the market at these levels, either to take profits or because they believe the security has reached a top and is likely to fall in price. When the price of a security rises to a resistance level and then starts to fall, it is said to have encountered resistance.
Support and resistance levels are often used in technical analysis to help traders identify potential areas where the price of a security may change direction. However, it’s important to note that these levels are not a guarantee of future price movements and should be used as just one part of a trader’s overall analysis and strategy.Try again
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