Support and resistance are the foundation of technical analysis. They help traders understand where the price is likely to react.
Support is a level where the price tends to stop falling and bounce up. Resistance is a level where the price tends to stop rising and move down.
To use this strategy, start by identifying key levels on the chart. Look for areas where the price has reacted multiple times in the past.
When the price reaches support, traders look for buying opportunities. When it reaches resistance, they look for selling opportunities.
However, not all levels hold. Sometimes, the price breaks through them. This is called a breakout, and it can lead to strong moves.
A good technique is to wait for confirmation before entering a trade. For example, look for candlestick patterns or strong momentum.
Support and resistance work in all markets, including forex and crypto. Mastering them can significantly improve your trading results.