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Understanding Support, Resistance, and Spot Levels in Trading

In technical analysis, support and resistance levels are key concepts used by traders to make informed decisions. Support refers to a price level where an asset tends to find buying interest as it drops, preventing it from falling further. It's essentially the "floor" that stops the price from declining, as traders view the asset as undervalued at that level and start buying, creating upward pressure.

On the other hand, resistance is the opposite. It’s a level where the asset faces selling pressure, halting further upward movement. Think of it as a "ceiling" that prevents the price from rising too much. When an asset hits this level, traders may start selling, leading to a potential decline.

The spot price refers to the current price of the asset in the marketplace. It’s the real-time value that fluctuates with buying and selling activities. The spot price may move between support and resistance, helping traders predict future price movements.

Traders often use these levels to enter or exit trades. A break above resistance may signal a potential buy, while a drop below support could suggest a sell opportunity. Understanding these concepts is crucial for managing risk and maximizing profit in the financial markets.

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