Support and resistance are two of the most fundamental trading and technical analysis concepts. The term “support” refers to a price level where the price finds a “floor.” In other words, a support level is a high-demand sector when buyers enter and push the price upward. The term “resistance” refers to a price level where the price hits a “ceiling.” A resistance level is a point when there is a lot of supply and sellers come in and push the price down.
Support and resistance are now understood to be levels of enhanced demand and supply, respectively. When considering support and resistance, however, numerous additional elements can come into play. Trend lines, moving averages, Bollinger Bands, Ichimoku Clouds, and Fibonacci Retracement are examples of technical indicators that can be used to predict probable support and resistance levels. In fact, parts of human psychology are incorporated. As a result, traders and investors may use support and resistance in their trading strategies in quite different ways.
Would you like to know how to draw support and resistance levels on a chart? Check out The Basics of Support and Resistance Explained.