🚀Support and Resistance: The Basics Imagine the market as a ping-pong ball bouncing between two invisible walls. These invisible walls are called support and resistance. The floor is support- where buyers step in to catch the fall. The ceiling? That's resistance, where sellers say, "Not so fast," and push the price back down. Your job? Figure out where these walls are and use them to your advantage.
Resistance is the opposite. It's the price level where an uptrend might stall because sellers step in, seeing the price as overbought. It's the market's ceiling, and breaking through it can be tough.
How to Spot Support and Resistance
Here's the good news: spotting these levels is easier than you think. Start by zooming out on your chart and identifying where price reversals have occurred. Where has the market consistently bounced up from? That's your support. Where has it been smacked down? That's your resistance.
That's also when everyone becomes a chartist and technical analyst-draw horizontal lines at these levels. And boom, you've just identified key support and resistance zones. But there's more to it than just connecting the dots.
How to Trade Support and Resistance Buying at Support When the price pulls back to a support level,it's a prime buying opportunity.
Just remember, you're not the only one watching this level-fellow retail traders, professional money spinners and lots of algorithms are trained to chase trends. Use additional confirmation, like a bunch of indicators stacked together, before you pull the trigger.
Selling at Resistance : If the price rallies to a known resistance level, it's time to think about selling. Again, wait for some confirmation-a rejection, bearish pattern, or a volume spike-to avoid getting caught in a breakout.
Breakout Trades : If a price breaks through support or resistancewith conviction (read: strong volume), it often leads to significant moves. You can trade these breakouts, but be cautious of false breakouts. Nobody likes getting trapped.
