$ACM /USDT

Understanding Support and Resistance in Trading

In financial markets, support and resistance are crucial concepts for traders and investors. These terms 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 the level at which an asset’s price tends to stop falling. At this point, demand typically outweighs supply, causing the price to stabilize or rebound. Traders often see support as a buying opportunity because the asset has historically bounced back from this level.

On the other hand, resistance is the price level where an asset faces selling pressure. When the price rises to this level, many traders start selling, limiting the asset’s ability to increase further. Resistance is seen as a signal to sell or avoid buying until the price breaks through this barrier.

Once a price breaks through either support or resistance, these levels can switch roles; previous resistance can become new support, and vice versa. By spotting these levels and anticipating their significance, traders can make more informed decisions, potentially improving their chances of profitability. Understanding support and resistance is essential for technical analysis in trading.

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