TEKNOFFICE.COM – What does Support & Resistance mean?
Support & Resistance are one of the main features of Technical Trading. The term Support & Resistance are levels where an area acts as a price barrier and preventing the price to beyond that.
It is one of the most common techniques used by the majority of traders to enhance their trading style. It depends on an individual how it draws it.
So, why does Support & Resistance work? Well, it depends on market behavior and how did you draw it, because every trader has its style to draw it but one main criterion to draw it, where price respecting it are multiple.
The more no. of times, price hitting that area is more valuable the area it becomes. So, it becomes really hard for the price to break that level.
What is Support?
An area is called to be a support when the price is above a particular area, where price hodlsit multiple times in the past.
What is Resistance? It’s just the opposite of support when the price is below a particular area, where the price rejected that area multiple times.
How to draw a Support line?
The support points can be easily identified by looking at the chart. Support is where the price bounce back, look for those points where the price bounced back many times, and draw a line connecting the support points. You will get a horizontal support line.
How to draw a Resistance line?
Resistance is a point where the price of the asset is rejected many times. The market tests the resistance and traders start booking profits that result in a drop in the price. You need at least two points to draw a valid resistance line.