What is Support and Resistance?

support and resistance_FinWatchers

There are many ways to predict further forecasts in the cryptocurrency market. But many people get stuck while we talk about forecasts or predictions.

So, what is it? Is it predicting the future? But if you could predict the future, then you would be God. Jokes aside, let’s understand what it is. 

In simple terms a prediction or forecast means to identify a directional trend while live market.


In any financial market there is a ratio of 50/50, either you will achieve your goal, or you will lose, there is no in-between. 


There are only two consequences of trading: profit or loss. At the initial learning stage, speculators should get acquainted with the basics of support and resistance and try to it use while trading or investing.


Put in laymen’s words, the support and resistance work as a barrier, frequently pausing directional trends. 


Support - A Sneak Peak

As its literal translation, a support means base or foundation. Support becomes visible when a downtrend is likely to pause because of demand in the live market.


The support is a key hedge zone of buyers, where they defend themselves from more sell-off in any crypto asset.


When Does Support Occur?

Support is a level from which a crypto price pumps to the higher territory from any specific level or a zone.


A strong support level occurs when a coin reverses its drop to the bullish for two or more than two times. 


Source: Tradingview 


As shown above in the chart, the SNX token price was taking support near $9.0 level, and bears have multiple attempts over there.


The support level becomes stronger when demand increases near after a dramatic fall or a retracement phase. 


How can I Take Advantage of the Support Level?

Once a support level has been identified, it indicates to the right time for buyers and in some cases, selling too.


Buyers can buy any favourable coin if they see potential on that when asset prices come near this following level. With practice you may hone your skill and better understand about support. 


Resistance - A Secret Look

Contrary to the support level, a resistance is a seller’s defending zone.


When buyers continue to get rejection at a particular zone or a level, then a bullish trend is likely to pause temporarily due to more than average circulating supply in the market.



Source: Tradingview 


Above the GALA price graph, anyone can easily identify a bullish hurdle near $0.117 level.


At this particular level, buyers witnessed it decline multiple times and often got trapped also.


However, after several attempts, price action finally registered a rapid rally. 


How Can I Make Profit by Using Resistance?

When the price trend gets rejected more than two times from the exact zone, it concerns as a key resistance.


So, if you observe the resistance zone on the graph, you can sell-off the asset for a short-term view. But this strategy takes a lot of time to master. 


Often times, speculators are trapped by the market manipulators by spreading rumours of fake breakout and breakdown.


Therefore, the trading volume matters at this point, if you observe massive changes in volume while breakout the only should take a rise as per your concern.  


It happens, resistance turns out in the support after breakout, besides, the support becomes the resistance zone after breakdown.


This simple strategy can help you in your beginner trading career.

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Disclaimer:
This information is for educational purposes only and does not constitute investment advice. No person should rely on it to make any investment. Investing carries risks, including the loss of capital. All opinions expressed are subject to change without notice. Past performance is not indicative of future results. Always seek the advice of a licensed investment professional before making any investment.