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Understanding Support and Resistance in Trading

Support and resistance are two of the most important concepts in technical analysis for traders. They refer to specific price levels on a chart that tend to act as barriers, preventing the price of an asset from moving in a certain direction.

Support is a price level where a downtrend can be expected to pause due to a concentration of demand. When the price of an asset drops to a support level, it often bounces back as buyers step in, seeing it as a good value.

On the other hand, resistance is a price level where an uptrend is likely to pause or reverse due to selling pressure. As the price approaches this level, sellers might see it as a good opportunity to exit or short the asset.

Identifying these levels can help traders make decisions about when to enter or exit a trade, as well as where to place stop losses or take profits. It’s important to note that once a support or resistance level is broken, it may reverse its role—support can become resistance and vice versa. This dynamic helps traders anticipate future price movements and enhance their strategy.

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