Support and Resistance Levels - Chart Patterns
Support levels are said to be price areas with high demand where more declines cannot be avoided. In other words, a price "floor" is a place where traders expect that the security will rise. For example, if a stock's price keeps dropping until it hits $50 then goes back up, the price will now be considered to have strong support at $50.
Resistance Price Selling pressure keeps the price from rising above a certain level or "ceiling.". When a Market Can Not Push past this level it becomes established as resistance.
These are shifting and dynamic levels or conditions. A sign of trend continuation or reversal is on breakout of price above resistance levels or below support levels, offering various opportunities in trading.
Support and Resistance are the basics of technical analysis which help traders by providing an index for possible price action condition in financial markets, derived from the chart patterns where traders are found at psychological barriers of buying or selling pressure. Knowing and using support and resistance can help traders make informed decisions and manage risks effectively.
Traders using these levels on what could anticipate price movements can definitely set points of entry and exit not forgetting to deploy stop loss orders giving them theoretical maximum value.
Thus, high prices at which traders may find no counterpart willing to sell more will represent resistances and identified as an action ceiling while the supports may be lower prices at which traders find no counterpart willing to buy more representing an action floor.
Thanks
~ Nesaty
Support and Resistance Levels - Chart Patterns is a great post.
For many years, I was actually trying to understand how to trade the support and resistance but it actually took me long