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Understanding Support and Resistance in Trading

Support and resistance are critical concepts in technical analysis that help traders make informed decisions. Support refers to a price level where a stock or asset tends to find buying interest, preventing the price from falling further. It acts as a "floor" where demand is strong enough to halt a decline. When the price approaches this level, it often bounces back up due to renewed buying activity.

On the other hand, resistance is a price level where selling pressure outweighs buying interest, preventing the price from rising further. It serves as a "ceiling" where sellers tend to dominate, causing the price to retreat. When the price approaches resistance, it often struggles to break through, leading to a pullback.

Traders use support and resistance levels to identify potential entry and exit points. If the price breaks through resistance, it may signal a potential uptrend, while breaking support could indicate a potential downtrend. These levels are dynamic and can shift based on market sentiment and economic factors. Mastering support and resistance helps traders anticipate price movements and manage risk more effectively.

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