What are Support and Resistance Levels?

Support and Resistance are used in technical analysis to spot levels where current market prices are likely to bounce back whether downwards or upwards instead of breaking through.

"Support levels" are found below current market prices whereas "Resistance levels" are higher than current market prices.  When prices reach a support or resistance level, there are typically 2 scenarios; either the instrument fails to break the support/resistance level and retraces or the instrument breaks it and continues to the next support/resistance level.

There are multiple ways to spot support and resistance levels like earlier "highs" and "lows", trendlines, moving averages, Patterns and Fibonacci levels.

Support and Resistance levels are typically used by traders to decide on trading "entry" and "exit" points.

Posted on Monday, 4th of June, 2012.