Support and resistance levels are points where a chart experiences recur?ring upward or downward pressure. A support level is usually the low point in any chart pattern (hourly, weekly, or annually), whereas a resis?tance level is the high or the peak point of the pattern.



These points are identified as support and resistance when they show a tendency to reappear. It's best to buy near support or sell near resistance levels that are unlikely to be broken. Once these levels are broken, they invariably reverse their roles. Previous support becomes resistance and previous resistance becomes support.

Support and resistance levels are very important to your trading; it's critical that you understand them.

In uptrends, every time the price drops to the uptrend line and then re?sumes its advance, the trendline has acted as support to the price uptrend. Support can also be found at prices of previous support or resistance.

In downtrends, every time the price rises to the downtrend line and then resumes its decline, the downtrend line has acted as resistance to the up?ward move of market prices.

Consider the following: when price action drops to a certain level, the bulls (the buyers) take control and prevent prices from falling lower. Similar to support, a resistance level is the point at which bears (the sell?ers) take control of prices and prevent them from rising higher.

Support is the price level at which demand is thought to be strong enough to prevent the price from declining further.

The logic dictates that as the price declines towards support and gets cheaper, buyers become more inclined to buy and sellers become less inclined to sell. By the time the price reaches the support level, it's be?lieved that demand will overcome supply and prevent the price from fal?ling below support.

Resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.

The logic dictates that as the price advances towards resistance, sellers become more inclined to sell and buyers become less inclined to buy. By the time the price reaches the resistance level, it's believed that supply will overcome demand and prevent the price from rising above resis?tance.

The price at which a trade takes place is the price at which a bull and bear agree to do business. It represents the consensus of their expecta?tions. The bulls think prices will move higher and the bears think prices will move lower.

Support levels indicate the price at which a majority of investors believe that prices will move higher, and resistance levels indicate the price at which a majority of investors feel prices will move lower.

The development of support and resistance levels is probably the most noticeable and reoccurring event on price charts.