The terms support and resistance are used in technical analysis to identify a price level at which the price of a security is expected to go up or turn down.
Technical analysts use support and resistance levels to identify areas of interest on a price chart. These are the levels where the likelihood of a reversal or a pause in the underlying trend may be higher. Support and resistance are key concepts when it comes to exercising proper risk management.
On the most fundamental level, support and resistance are simple concepts. The price finds a level that it’s unable to break through, with this level acting as a barrier of some sort. In the case of support, price finds a “floor,” while in the case of resistance, it finds a “ceiling.” You could think of support as a zone of demand and resistance as a zone of supply.
Support refers to a level that tends to hold the price of an asset, preventing it from going down. The occurrence of support levels is caused by a strong buying pressure at that price zone, but it may also be related to big buy walls that can make it harder for the price to drop further.
When drawing support lines or zones, it is advised that you consider at least two previous lows (ideally three or more). The more points you use to back your analysis, the more reliable it will be. The same is valid when drawing resistance and trend lines.
When a support level is broken, it tends to become a resistance level, which would then present an opposite effect. So instead of acting as a support, the line would now act as resistance, acting as a ceiling that is likely to prevent the price from rising further. Typically, good trading opportunities arise when resistance or support levels are broken.
Resistance, in cryptocurrency trading, means that a certain price level will not be broken through. Resistance levels are caused by large sell walls and represents ceilings in price.
In simple terms, resistance is a ceiling. If the price is below the resistance level, more people are selling than buying – and you need a lot of buyers to go above the resistance. If you hit resistance, you need to respect it. A strong currency will have at least 2-3 (or more) significant levels of resistance.
Resistance is the result of someone having sold a significant amount of an asset in the past. Maybe they wanted to lock in their profits, maybe they needed to make payments or maybe they just didn't see the big picture and sold their coins too soon. Whichever way, someone put a large amount of sell orders in an area, creating a natural barrier that the price can't pass through.
In cryptocurrency trading, resistance levels are important support levels that the price action must break through in order to keep a certain trend going. Resistance is caused by the force of supply pushing against demand at certain price levels.