What is Support & Resistance ?

The concepts of support and resistance in financial markets are one of the most basic concepts of technical analysis and are valid for all markets in the world. These concepts primarily operate in different ways according to changing market conditions. They have different types and need to be understood. In addition, it is necessary to work on a large number of graphics in order to make sense of it. In the article, detailed information will be given on how to start studying these concepts.

 

WHAT IS SUPPORT AND RESISTANCE?

In their simplest form, these two terms are basic concepts. When the price reaches a certain level, it moves in the lower and upper level range. At support, the price reaches the base value, and at resistance, it reaches the ceiling value. Considering that the markets are shaped on the supply-demand balance, its support is interpreted as the demand region and its resistance as the supply region.

It would be more beneficial to evaluate the support and resistance as a region considering all the conditions of the market. It is defined as support when it is up, and resistance when it is down, after trying several times in the region ranges where support and resistance are formed.

 

How can support and resistance levels guide investors?

In a price chart, technical analysts pay attention to support and resistance levels. Because the formation of these levels helps to inform the investors about the possible price changes of the trading levels and market activity in the market. Support and resistance are key concepts for risk management in this regard. Support and resistance levels provide important opportunity points for trading. For example, for large traders (aka whales), support and resistance zones make it an ideal position to enter or exit.

 

When a price reaches a support or resistance zone, there are two possible outcomes. The price will either have a downward reflection or an upward climb from the region it is in. This determines the next possible support and resistance levels. A common example of a useful strategy is to buy or sell near the support or resistance zone.

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