Support and Resistance Levels: What, Why, and How to Trade Them

In technical analysis, support and resistance levels are price levels that a security or asset tends to reach but then experiences a reversal in direction.

Support levels are price levels at which demand for a security or asset is strong enough to prevent the price from falling further. This means that when the price reaches a support level, it is likely to "bounce" back up. Traders and investors often look for support levels as potential buying opportunities.

Resistance levels are the opposite of support levels. They are price levels at which supply for a security or asset is strong enough to prevent the price from rising further. When the price reaches a resistance level, it is likely to "bounce" back down. Traders and investors often look for resistance levels as potential selling opportunities.

Support and resistance levels can be identified using various technical analysis tools, such as trendlines, moving averages, and chart patterns. It is important to note that these levels are not always exact and can be breached or broken by market forces.