Important facts about support and resistance:
– In terms of support, the demand for an asset is particularly high
– In terms of resistance, the supply for an asset is particularly high
– The price can be seen as expensive or cheap
– Many traders want to buy or sell there because the price is attractive
WHAT IS A RESISTANCE?
Resistance is the level at which prices are believed to be strong enough to prevent prices from rising further.
The resistance doesn’t always hold up; a break above the resistance signals that the bulls have triumphed over the bears.
WHAT IS SUPPORT?
Support is the price level at which it is believed that demand is strong enough to prevent prices from falling further.
Support does not always hold and a break below support signals that the bears have triumphed over the bulls.
METHODS TO MARK SUPPORT AND RESISTANCE:
share enough common characteristics to be effectively mirror images of one another.
Highs and lows:
Support can be made with the previous reaction lows, while resistance can be made with the previous reaction highs.
-> Support becomes resistance (and vice versa too)