Support and resistance: what they are and how to use them
Support and resistance are the two most important concepts in technical analysis: the price levels where a move tends to stop or reverse.
Support
A level below the price where buying tends to stop the decline: like a "floor". The more it's tested without breaking, the stronger it is.
Resistance
A level above the price where selling tends to stop the rise: a "ceiling".
The role swap
When a support breaks downward, it often becomes resistance (and vice versa). One of the most useful behaviours to recognise.
How they're used
You buy bounces near supports and take care near resistances; the stop loss usually goes just beyond the level, where the idea would be "wrong".
Frequently asked questions
What is a support?
A price level below the current value where buying tends to stop the decline.
What is a resistance?
A level above the price where selling tends to stop the rise.
What does a broken support become?
It often becomes resistance: the level swaps role once it's been passed.
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