What is support and resistance in trading?

Support and resistance are important concepts in trading that refer to price levels where the price of a security may experience difficulty rising above (resistance) or falling below (support). These levels may be based on historical price data, chart patterns, or other technical indicators, and are used to identify potential buying and selling opportunities.

Support levels are price levels where the demand for a security is thought to be strong enough to prevent the price from falling further. If the price falls towards a support level and then begins to rise, it may be seen as a bullish sign and may indicate that the security is oversold. Conversely, if the price falls through a support level and continues to fall, it may be seen as a bearish sign and may indicate that the security is in a downtrend.

Resistance levels are price levels where the supply of a security is thought to be strong enough to prevent the price from rising further. If the price rises towards a resistance level and then begins to fall, it may be seen as a bearish sign and may indicate that the security is overbought. Conversely, if the price rises through a resistance level and continues to rise, it may be seen as a bullish sign and may indicate that the security is in an uptrend.

Support and resistance levels are not guarantees of future price movements and should be used in conjunction with other technical and fundamental analysis tools to confirm trend signals. In addition, support and resistance levels can be subject to interpretation and may be influenced by the biases and expectations of the analyst. As a result, different analysts may come to different conclusions about the same data.