Support and Resistance For Beginners :

Support and resistance are the most intense places where supply and demand forces meet. In financial markets, prices move according to supply (down) and demand (up). Demand is associated with "bulls", and buying. Supply is associated with "bears," and selling. As demand rises, price rises; as supply rises, price falls. If demand and supply are equal, the price fluctuates in a horizontal corridor (consolidation, flat). And "waits" until one of the forces wins. L

Support is a certain price level, at which demand strengthens and prevents the price from falling below. It follows from logical reasoning that as the price of an instrument gets lower, the bulls are more and more inclined to buy and the bears are less and less inclined to sell. By the time the price touches the support zone, demand should overpower supply and prevent further decline.

But support does not always withstand price pressure:

Price breaking through the support line indicates that the bears have won over the bulls. Such a strong downward movement indicates that the bears had a new desire to sell, while the bulls had no desire to buy. This price behaviour shows that the bears have lowered their expectations of the asset and are willing to sell at a lower price. Moreover, the bulls have also lowered their view of the asset and are not reacting as actively until the price goes far above the support line.

Resistance is the level of the price of an instrument at which supply increases enough to prevent the price from going higher. It logically follows that as the price approaches the resistance level, the bulls are less and less willing to buy and the bears are more and more inclined to sell. By the time the price reaches the resistance level, the sellers will be selling the asset so intensely that they will simply prevent the bulls from driving the price higher.

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