In This Post, We Will Going To Learn About Support And Resistance Levels In Technical Analysis, How To Find Them And Make Money Out Of It With Little Risk And Big Reward. On Chart, Support And Resistance Identify Areas Of Supply And Demand. This Is The Most Important Aspect Of Trading. Understanding The Concept Of Support And Resistance In Trading Can Drastically Improve Your Short-Term Trading As Well As Long Investing Strategy.
Support And Resistance Represent Key Levels For Trading Where The Forces Of Supply And Demand Meet.
In Technical Analysis, Support And Resistance Is A Concept That The Movement Of The Prices Will Tend To Stop And Reverse At Certain Predetermined Price Levels. These Levels Are Represented By Multiple Touches Of Price Without A Breakthrough Of The Level.
In The Stock Markets, Prices Are Driven Down By Excessive Supply While They Will Rise On Profuse Demand. Supply Means Bearish, Bears Or Selling Or Drop In Prices While Demand Means Bullish, Bulls And Buying Or Rise In Prices. With Demand Increase, Prices Advance and As Supply Increases, Prices Decline. When Supply And Demand Are Equal, Prices Move Sideways As Bulls And Bears Fights For Control.
What Is Support Level?
Support Level Is The Price Level At Where Demand Become Strong Enough And Prevent Further Decline. The Logic Behind This Is That Price Declines Towards Support And Security Gets Cheaper, So Buyers Become More Prone To Buy Due To Greed While Sellers Stop Selling Due To Fear. At The Time When Prices Reaches The Support Level, Demand Overcomes Supply And Stop The Price From Falling Below Support.
Support Does Not Always Hold And A Break Below Support Signals That The Bears Have Won Out Over The Bulls. A Decline Below Support Indicates A Fresh Sell Signal Or Exit From Buy Position. Support Breaks And New Lows Signal That Sellers Willing To Get Out Of Positions At Any Cost And Are Willing Sell At Even Lower Prices Or Buyers Failed To Buy Until Prices Declined Below Support Or Below The Previous Low. Once Support Is Broken, New Support Level Will Take Its Place At A Lower Level.
Where Is Support Level?
Support Levels Are Usually Below the Current Price, But It Is Common For A Prices to Trade At or Near Support. Technical Analysis Is Not An Exact Science And It Is Sometimes Difficult To Set Exact Support Levels. Furthermore, Price Movements Can Be Too Volatile And Give Dip Below Support Temporarily. Professional Trader’s Logic for This Is to Consider a Support Level Broken If the Price Closes 1/8 Below the Established Support Level and Where They Place Their Stop Loss Orders for Their Long Positions. For This Purpose, Some Traders And Investors Establish Support Zones.
What Is Resistance Level?
Resistance Is The Price Level At Where Supply Become Strong Enough And Prevent Further Rise In Price. The Logic Behind This Is That Price Rise Towards Resistance And As Prices Gets Expensive And Out Of Reach Of Buyers, So Sellers Become More Prone To Sell Due To Greed While Buyers Stop Buying Due To Fear. At The Time When Prices Reaches The Resistance Level, Supply Overcomes Demand And Stop The Prices From Rising Above Resistance.
Resistance Does Not Always Hold And A Break Above Resistance Signals That The Bulls Have Won Out Over The Bears. A Break Above Resistance Shows A Buying As Well As Short Covering Momentum Or A Lack Of Sellers. Resistance Breaks And New Highs Show Buyers Have Increased Their Prospects And Are Ready To Buy At Even Higher Prices. Furthermore, Sellers Could Not Sell Or Their Absence In Market Until Prices Rose Above Resistance Or Above The Previous High. Once Resistance Is Broken, Another Resistance Level Will Take Its Place At A Higher Level.
Where Is Resistance Level?
Resistance Levels Are Usually Above The Current Price, But It Is Common For A Prices To Trade At Or Near Resistance. Additionally, Price Movements Can Be Too Volatile And Rise Above Resistance Temporarily. Sometimes Professional Trader’s Logic for This Is to Consider a Resistance Level Broken If the Price Closes 1/8 Above the Established Support Level and Where They Place Their Stop Loss Orders for Their Short Positions. For This Motive, Some Traders And Investors Establish Support Zones.
In Upcoming Posts We Will See How To Create Support And Resistance Levels, When Support Become Resistance And Resistance Become Support, Using SR Levels To Mint Profit In Range Trading, And How To Use Support And Resistance Levels With Indicators And Oscillators To Make Big Profits In Stock Market. So Stay Connected and Follow Us on Social Media for Continues Updates.