What is support?
• Support is a price level at which a decline stops due to increased demand from buyers.
• When the price reaches this level, an upward bounce often occurs as a result of buyers' intervention.
• Example: If the price of Bitcoin is at $94,000 and repeatedly drops to $90,000 and then bounces back up, then $90,000 is considered the support level.
What is resistance?
• Resistance is a price level at which an increase stops due to increased supply from sellers.
• When the price reaches this level, a bearish bounce often occurs as a result of selling pressure.
• Example: If the price of Bitcoin repeatedly rises to $96,000 and then bounces back down, $96,000 is considered the resistance level.
How to use support and resistance in trading?
1. Buy on support:
• Buy when the price reaches the support level and expect it to bounce upwards.
2. Sell at resistance:
• Sell when the price reaches the resistance level and expect it to bounce back down.
3. Waiting for the breakout:
• If the price breaks through a support or resistance level (with high trading volume), the trend can be expected to continue.
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