Support and Resistance
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Support and resistance are price areas where market behavior has historically shown increased buying or selling interest. Support is commonly associated with an area where downward movement may encounter demand. Resistance is commonly associated with an area where upward movement may encounter supply.
Levels vs. Zones
Support and resistance should not automatically be treated as perfectly precise single prices. In real markets, they are often better understood as zones with some price tolerance.
How We Use Them
These areas can help us define market structure, potential entry or exit locations, and invalidation points. They do not guarantee a reversal. A support area can break, and a resistance area can be exceeded.
Key Terms
Support, resistance, demand, supply, level, zone, breakout.
Knowledge Check
- What is support?
- Why can support and resistance be zones rather than exact prices?
- Does support guarantee that price will reverse upward?