Support and resistance
What are support and resistance (S/R)? In technical analysis (i.e., the study of the charts), they are very important levels where the price is more likely to “bounce”.
A support is a zone that the price may hit from above and then bounce up. A resistance is a zone that the price may hit from below and then bounce down. There are three main types of support and resistance:
- Horizontal: S/R are horizontal zones
- Trendline: S/R are zones with a slope
- Indicators (e.g., Bollinger bands, moving averages): S/R are determined by some indicators.
You can find below some examples.
Moving average S/R
There are many ways to use S/R, not only to decide when to enter with a long or short position but also where to take profit for an open position. If you would like to know more about S/R, and how to identify them automatically, have a look at the following videos.