About Support and Resistance Levels

By Aleksandra Wilson
3 min read August 16, 2021

What are support and resistance levels?

The support and resistance levels are an essential tool to play a part in every financial market. Here is where the bullish and bearish forces collide, offer and demand, and only the winner prevails. It is the market makers setting these levels according to a trend. In simple terms, these are the levels where the price stops and continues with a different movement. Support is the level at which the price slows its decline to rise again. Resistance is the level at which the price stops growing and begins its descent.

Support and Resistance in Trading

The more times the price has carried out this behavior at these levels, the easier it will be to predict the price movement in the future. That is added to the fact that support and resistance levels are considered psychological levels. That is, traders tend to buy or sell at those points, which helps to strengthen them. Traders must pick the best positions to place their support and resistance levels; otherwise, the chart can turn out to be impossible to read. Also, it is essential to learn how to draw supports and resistances correctly.

Support and resistance levels
Trading tools
technical analysis

What to Look After

One of the main problems when analyzing support and resistance is identifying the moment of change or break. While there are some accepted percentages, there is not a consensus. Given the high volatility of the markets, this has to be considered together with other indicators. It’s important to use supports and resistances as a signal and assess all circumstances affecting the value.

Advantages of Using These Indicators

We could name many advantages when we talk about using support and resistance levels. Let’s sum it up in three main ones. One, it’s easy to use; even if you’re a newbie in the world of trading, it will be easy to keep up with this. If you find yourself having difficulties, there are many online articles explaining how to work with it, such as this one. Second, well-defined resistance and support points can potentially save you from significant losses. And last but not least, adjusting objective purchase and sale prices and not being subject to news or rumors can help you remove the human error factor.

Conclusion 

In the end, we can conclude that every tool that you can use in your favor will be an ally in your quest to accomplish your goals. Although, that is no guarantee that you’ll end up becoming a millionaire overnight. It would be best if you tried learning about all these tools and constantly read about the markets. Also, you should never go straight into trades. Try testing yourself and your strategies first with a demo account. This way, you’ll be able to identify and correct your mistakes without suffering losses.

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