Preview
Support and resistance are fundamental pillars of technical analysis, marking key price levels where market momentum may shift. These levels not only highlight where buyers and sellers are most active but also serve as critical guides for making informed trading decisions. By analyzing historical price data and trading volumes, traders can identify potential reversal points that signal either a pause in an uptrend or a rebound from a downtrend.
At its core, support acts as a “floor” where increased buying interest prevents further price declines, making it an attractive level for entering long positions. Conversely, resistance functions as a “ceiling,” where rising prices often stall as sellers dominate, prompting traders to consider selling or shorting the asset. The more frequently these levels are tested without being breached, the stronger and more significant they become in the trader’s strategy.
Moreover, techniques such as stop-loss orders are commonly employed around these levels to mitigate risk, ensuring that potential losses are kept in check if the market unexpectedly moves against the trader’s position. The dynamic interplay between supply and demand is further illustrated by market phenomena like liquidity sweeps and liquidity grabs, where rapid price movements reveal bursts of buying or selling pressure.
This introduction lays the groundwork for a more detailed exploration of how professionals precisely identify and utilize these critical support and resistance levels to enhance their trading strategies.
Get full access to this article and other exclusive content by becoming a subscriber. Stay ahead of the curve with expert insights and analysis.