Support and resistance for trading

Support and resistance for trading is a small article on the definition of these concepts with pratical examples.

The first critical terms for understanding the basics of technical analysis are “Support” and “Resistance.” These terms are used by technical traders on a daily basis, so understanding what these mean will be vital for charting analysis.

Examples of Support

First, “support” is thought of as an area where buyers have previously stepped into the market in order to raise the value of an asset. The term applies to price activity in all types of assets (stocks, commodities, currencies, etc) and in the following charts we will look for examples of support for each of these categories. Below are examples of support (shown in blue lines) in a chart showing the S&P 500:

These blue lines show areas where buyers have helped propel market prices higher. Below is a similar example in the EUR/USD currency pair:

Finally, so that we can see that the term applies to all asset classes, we will see similar examples of support on the commodity of oil:

Examples of Resistance

Conversely, “resistance” is thought of as an area where sellers have previously stepped into the market in order to decrease the value of anasset. The term also applies to price activity in all types of assets and in the following charts we will look for examples of resistance for each of these categories. Below are examples of resistance (again shown in blue lines) in a chart showing the S&P 500:

These blue lines show areas where sellers have helped push down (or resist) market prices. Below is a similar example in the EUR/USD currency pair:

Finally, an example of resistance areas shown in an oil chart:

As a final point, it should be remembered that support and resistance levels can be found on any time frame and for any type of asset. The main point you will need to remember is that there are previous pricing areas where buyers or sellers entered the market, which creates an increased possibility that prices will exhibit the same behavior (either rising or falling) if prices reaches those areas again in the future.