Support and resistance key level conform the most basic analytical tools and are commonly used as visual markers to trace the levels where the price found a temporary barrier. In other words, where price had hurdle crossing.
From a strategic point of view, support and resistance key levels represent smart zone to anticipate a reaction in the price of an asset, and therefore represent a basic tool in technical analysis.
Numerous best traders use them, but the diversity in application and integration tell us that charting is definitely not an exact science and more of an art.
One of the most common mistakes that new traders make is buying too close to a key level of resistance or selling too close to a key level of support. In this page we provide enough set-ups and real-time examples, to make sure you thoroughly understand this simple yet important dynamic. – GoldSilverReports.com
KEY TAKEAWAYS
- Technical analysis use support and resistance key levels to identify price points on a chart where the probabilities favor a pause or reversal of a prevailing trend.
- Support occurs where a downtrend is expected to pause due to a concentration of demand.
- Support and resistance areas can be identified on charts using trendlines and moving averages.
- Resistance occurs where an uptrend is expected to pause temporarily, due to a concentration of supply.
- Market psychology plays a major role as traders and investors remember the past and react to changing conditions to anticipate future market movement.