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Understanding Support and Resistance in Trading

Support and resistance are fundamental concepts in technical analysis, used by traders to identify potential price movement patterns in the market.

Support refers to a price level where a stock or asset tends to find buying interest, preventing it from falling further. At this level, demand outweighs supply, causing the price to bounce back. When an asset approaches its support level, traders often expect the price to stabilize or reverse, offering buying opportunities.

Resistance is the opposite: a price level where selling interest tends to emerge, capping upward movement. At resistance, supply exceeds demand, preventing the asset from rising further. Traders often sell at these levels, anticipating a reversal or slowdown in price movement.

Understanding how prices behave at support and resistance levels helps traders make informed decisions about entry and exit points. These levels are not always exact, but they provide key insights into market psychology and trends. Breaking above resistance can indicate a bullish trend, while breaking below support may signal further downward movement.

By recognizing these zones, traders can manage risk and set effective trading strategies to maximize potential profits.

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