The level of support and resistance in trading are concepts used in technical analysis of financial markets. The essence of these concepts is that they help the trader determine the levels at which the price of an asset can change its direction.
The support level is the price level at which an increase in demand is expected and, as a result, a decrease in the probability of a further drop in the asset price. This is a place where buyers consider the price of an asset to be low enough and are ready to enter the market. The support level is usually a horizontal line on the price chart or the lower limit of the price range.
The resistance level is the price level at which an increase in supply is expected and, consequently, a decrease in the probability of further growth in the asset price. This is a place where sellers consider the price of an asset to be high enough and are ready to exit the market. The resistance level is usually a horizontal line on the price chart or the upper limit of the price range.
The difference between the support and resistance levels lies in their functions. The support level is designed to help determine a possible entry point for purchases, whereas the resistance level helps determine a possible exit point for sales. The support and resistance levels can also be used to determine profit levels and stop losses in trading.
The level of support and resistance in trading is the essence and differences - Something like that!
