Technical indicators like moving averages, Fibonacci tools, and pivot points are used to identify supply and demand zones that act as support and resistance levels. Support occurs when a downtrend pauses due to concentrated demand, while resistance occurs when an uptrend pauses due to concentrated supply. To identify support and resistance, horizontal lines are drawn connecting three or more past price points to represent areas where price has previously paused or reversed direction. These levels can then be used to set targets for trades by looking for prices to reach the next resistance or support level.
2. The indicators like moving average,
Fibonacci tools and pivot points identify
supply and demand zones at specific
instances and timeframes, depending on
the trend, and hence known as support
and resistance indicator.
SUPPORT AND RESISTANCE
3. • Technical analysts use support and resistance levels to identify
price points on a chart where the probabilities favor a pause,
or reversal, of a prevailing trend.
• Support occurs where a downtrend is expected to pause, due
to a concentration of demand.
• Resistance occurs where an uptrend is expected to pause
temporarily, due to a concentration of supply.
• Market psychology plays a major role as traders and investors
remember the past and react to changing conditions to
anticipate future market movement.
SUPPORT AND RESISTANCE
4. • Support and resistance are price points on the chart
• Support is a price point below the current market price that indicate
buying interest
• Resistance is a price point above the current market price that
indicate selling interest
• To identify Support and resistance , place a horizontal line in such a
way that it connects at least 3 price action zones, well spaced in
time. The more number of price action zones (well spaced in time)
the horizontal line connects, the stronger is Support and resistance
• Support and resistance can be used to identify targets for the trade.
For a long trade, look for the immediate resistance level as target.
For a short trade, look for the immediate support level as target.
How to Trade With SUPPORT AND RESISTANCE
