Support and Resistance

Post By - Divya Jain
Review By : Rohan Sharma
Updated on : October 28, 2021

Support levels

The support level is a price point on the chart where the trader expects the stock/index to have the most demand (in terms of buying). When the price falls below the support line, it will almost certainly rebound back. The current market price is always below the support level.

Resistance levels

The resistance level is a price point on the chart where traders expect the stock/index to receive the most supply (in terms of selling). The level of resistance is always higher than the current market price.

What are support and resistance tools?

Support and resistance tools are used to identify price points on a chart where the probabilities favor a pause or reversal of a prevailing trend.

Why use support and resistance tools?

When examining the psychology of financial markets, concepts like fear, greed, and herd instinct come up. This is due to the fact that human emotions influence market price action. As a result, a price chart can be viewed as a timeline of optimism and pessimism. Market participants’ reactions to changing future expectations are depicted in price charts.

Key Takeaway

A price point below the present market price that indicates buying interest is known as support.
A price point above the present market price that indicates selling interest is known as resistance.
Targets for the trade can be identified using S&R. Look for the immediate resistance level as a goal for a long trade. Look for the immediate support level as a goal for a short trade.

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Support and Resistance