What is Support and Resistance?


Support and resistance are fundamental concepts in technical analysis used by traders to identify price levels on charts where an asset tends to reverse direction or pause.

🔻 Support

  • Definition: A price level where a downtrend can be expected to pause due to a concentration of demand.

  • Explanation: As the price drops and approaches the support level, buyers tend to step in, believing the asset is undervalued, which creates upward pressure.

  • Visual: On a chart, it looks like a "floor" that price hits and then bounces off.

Example: 






.

🔺 Resistance

  • Definition: A price level where an uptrend is likely to pause or reverse due to a concentration of supply.

  • Explanation: As the price rises and nears resistance, sellers begin to take profits or believe the price is too high, which creates downward pressure.

  • Visual: On a chart, it looks like a "ceiling" that price hits and then falls from.

Example: 







.

🔄 Why They Matter

  • Help traders identify entry/exit points.

  • Used to set stop-loss and take-profit levels.

  • Can help assess market sentiment.

🔁 Support/Resistance Flip

Sometimes, when price breaks through support or resistance, that level can reverse its role:

  • Old resistance becomes new support (after a breakout).

  • Old support becomes new resistance (after a breakdown).

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