Support and resistance are two foundational concepts in technical analysis.
Prices move because of supply and demand. When demand is greater than supply, prices rise. When supply is greater than demand, prices fall. Sometimes, prices will move sideways as both supply and demand are in equilibrium.
Here are the key takeaways:
- Technical analysts use support and resistance levels to identify price points on a chart where the probabilities favor a pause or reversal of a prevailing trend.
- Support occurs where a downtrend is expected to pause due to a concentration of demand.
- Resistance occurs where an uptrend is expected to pause temporarily, due to a concentration of supply.
- Market psychology plays a major role as traders and investors remember the past and react to changing conditions to anticipate future market movement.
- Support and resistance areas can be identified on charts using trendlines and moving averages.
Please go practice in $BTC chart for better understanding of these concept. Look at the chart and vision yourself watching those price action in the past, try to implement this knowledge to see if you can spot point of entry or exit, see if you got your stop loss exercise and miss out a big movement or manage your profit target more realistic to adapt market movements.
