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Understanding Support and Resistance in Trading

Support and resistance are fundamental concepts in technical analysis that help traders identify key price levels in a market.

Support refers to a price level where a falling asset tends to stop and reverse because buying interest is strong enough to overcome selling pressure. At this level, traders expect demand to increase, preventing the price from falling further. It acts as a “floor” for the price.

Resistance, on the other hand, is a price level where an asset tends to stop and reverse when rising. At this level, selling interest increases as buyers hesitate to push the price higher, creating a "ceiling" that limits further upward movement.

Traders use these levels to make decisions about when to enter or exit trades. For example, if a price approaches a support level, it could be a buying opportunity, while reaching a resistance level might signal a good time to sell.

Breakouts, when prices move through support or resistance levels, can indicate a new trend. Monitoring support and resistance is crucial for understanding market psychology and improving trading strategies.

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