Support and Resistance
Price levels where buying or selling pressure is strong enough to prevent further price movement.
Definition
Support and resistance are key concepts in technical analysis representing price levels where buying or selling pressure is historically strong enough to prevent the price from moving further. Support is a price level where demand is strong enough to prevent the price from declining further — it acts as a "floor." Resistance is a price level where selling pressure is strong enough to prevent the price from rising further — it acts as a "ceiling." When support is broken, it often becomes resistance, and vice versa. Traders use these levels to identify entry and exit points, set stop-losses, and determine risk-reward ratios. Support and resistance can be identified through previous highs/lows, moving averages, Fibonacci levels, and trendlines.
Related Terms
Technical Analysis
A method of evaluating securities by analyzing price charts, patterns, and statistical indicators.
TradingFibonacci Retracement
A technical analysis tool using horizontal lines at key Fibonacci levels to identify support and resistance.
TradingMoving Average
A technical indicator that smooths price data by creating a constantly updated average price over a specific period.
TradingStop-Loss Order
An order to sell a security when it reaches a certain price to limit losses.