Resistance is an area on a chart that price has risen to but struggled to break above. The diagram above shows how price rises up to the area of resistance and subsequently “bounces” sharply from this level. Resistance is the price level at which supply (selling power) is strong enough to prevent the price from rising further.
What is support and resistance analysis?
Support and resistance is one of the most widely followed technical analysis techniques in the financial markets. It is a simple method to analyze a chart quickly to determine three points of interest to a trader: If a trader can answer the three items above, then they essentially have a trading idea.
What are support and resistance levels on a price chart?
Support and resistance levels on a price chart are a visual representation of supply and demand. If supply and demand are in balance then the price will move more or less within a certain range. The bottom of the bandwidth represents the floor price.
What is a typical feature of support and resistance levels?
A typical feature of support and resistance levels is their interaction in response to price changes. In this way, support becomes resistance and resistance becomes support. This may sound a bit confusing but the example below makes it clear.
