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Understanding Support and Resistance in Trading

In trading, support and resistance are key concepts that help traders analyze price movement and make decisions. Support refers to a price level where a downward trend tends to pause due to an influx of buying interest. It acts like a "floor" preventing the price from falling further. When a price reaches this level, it can often bounce back, as traders view it as a good entry point for buying.

On the other hand, resistance is the opposite—a price level where a rising market meets selling pressure, acting as a "ceiling" that prevents the price from rising further. It is the point where traders believe the asset is overvalued and start selling, which can cause the price to reverse or consolidate.

Support and resistance levels are not fixed; they evolve based on market sentiment, economic factors, and investor behavior. Breakouts can occur when prices move beyond these levels, indicating either stronger trends or market reversals. Understanding these concepts allows traders to set effective entry and exit points, manage risks, and develop trading strategies with greater confidence.

Both support and resistance are fundamental tools for technical analysis, essential for identifying potential price movements in volatile markets.

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