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What is support and resistance?

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  • What is support and resistance?

    I have an ok understanding of it but can someone really explain it?

  • #2
    Support and resistance are terms used when analyzing technical price charts

    Support is an area on a chart where prices are likely to stop going down.

    Resistance is an area on a chart where prices are likely to stop going up.

    Knowing the major support and resistance points on a chart can tell you when to buy, sell, or hold.

    Both support and resistance points can be identified mainly by trendlines and moving average lines.

    Here is a chart to help you better understand:

    This is a chart of the S&P 500 with an obvious support point notated. An experienced trader knows exactly what was going on here. The S&P took a HUGE dive but it found support at that blue line. That line is the 200-day moving average. Its a very common technical indicator. It works because other traders use it. Very simple. A person who is looking to go long the S&P would wait until it hits that line and start "loading the boat".

    Conversely, a trader who was shorting the S&P would cover their short position when it hit that line.

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