What Is Support and Resistance?
Also known as: Support Level, Resistance Level, Support/Resistance
In short
Support and resistance are core technical analysis concepts defining the levels where price tends to stop falling because of buying demand (support) and the levels where it tends to stop rising because of selling pressure (resistance).
These levels are generally determined from lows and highs where the price has turned more than once in the past. Investors remembering these prices and concentrating their orders in these zones causes the levels to produce repeating behavior. Round numbers, moving averages and Fibonacci retracement levels can also act as support or resistance.
An important principle is role reversal: a broken resistance can later become support, and a broken support can become resistance. For example, when a price level that could not be exceeded for a long time is broken upward on high trading volume, one watches whether, when the price pulls back, the same level works as support this time. A breakout backed by volume is regarded as a clue to the strength of the move.
Support and resistance are zones rather than exact lines, and determining them is open to interpretation. The false breakouts and sudden wicks frequently seen in crypto markets are the main reason strategies relying on these levels are used together with risk management tools such as stop-loss orders.
Last updated: · This content is for information purposes only and is not investment advice.