Support and Resistance
Support occurs when falling prices stop, change direction, and begin to rise. Support is often viewed as a “floor” which is supporting, or holding up, prices.
Resistance is a price level where rising prices stop, change direction, and begin to fall. Resistance is often viewed as a “ceiling” keeping prices from rising higher. If price breaks support or resistance, the price often continues to the next level of support or resistance. Support and resistance levels are not always exact; they are usually a zone covering a small range of prices so levels can be breached, or pierced, without necessarily being broken. As a result, support/resistance levels help identify possible points where price may change directions.
Major vs. Minor Resistance/Support
Minor resistance or support temporarily delays rising or falling prices within a larger market trend while major resistance or support altogether stops either rising or falling prices and larger market trend changes direction. Minor price resistance/support is an artificial horizontal line representing an area, which previously served as price support or resistance, and has now transformed to the other. If price was previously a support level, it is now a resistance level.
Trade the “Bounce”
Buy when the price falls towards support.
Sell when the price rises towards resistance.
Trade the “Break”
Buy when the price breaks up through resistance.
Sell when the price breaks down through support.
Support occurs when falling prices stop, change direction, and begin to rise. Support is often viewed as a “floor” which is supporting, or holding up, prices.
Resistance is a price level where rising prices stop, change direction, and begin to fall. Resistance is often viewed as a “ceiling” keeping prices from rising higher. If price breaks support or resistance, the price often continues to the next level of support or resistance. Support and resistance levels are not always exact; they are usually a zone covering a small range of prices so levels can be breached, or pierced, without necessarily being broken. As a result, support/resistance levels help identify possible points where price may change directions.
Major vs. Minor Resistance/Support
Minor resistance or support temporarily delays rising or falling prices within a larger market trend while major resistance or support altogether stops either rising or falling prices and larger market trend changes direction. Minor price resistance/support is an artificial horizontal line representing an area, which previously served as price support or resistance, and has now transformed to the other. If price was previously a support level, it is now a resistance level.
Trade the “Bounce”
Buy when the price falls towards support.
Sell when the price rises towards resistance.
Trade the “Break”
Buy when the price breaks up through resistance.
Sell when the price breaks down through support.
