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What are the support and resistance in the stock market

support & resistance are the important price points on the chart of any securities at which the security is expected to attract the maximum amount of buying or selling

By Emmanuel AndrewPublished 7 months ago 3 min read

what is support :

As the term suggest it is the level at which the price of a security not fall further as the demand is sufficient enough to hold the price from falling future

In trading, support refers to a price level or range at which buyers are expected to enter the market and purchase an asset, thereby creating demand and preventing the price from falling further. In other words, support is a level at which the market has historically seen an increase in buying activity and the price has stopped declining.

Support is an important concept in technical analysis, which is a method of analyzing financial markets that uses charts and historical price data to identify trends and make trading decisions. Traders who use technical analysis will often look for support levels when deciding where to enter a long position (buy) in a market.

The identification of support levels is based on the assumption that market participants have memories and will act in a similar way to how they have acted in the past. Support levels can be identified using a number of different techniques, such as trend lines, moving averages, or chart patterns.

When an asset approaches a support level, traders may look for other technical indicators, such as momentum or volume, to confirm whether or not the support level is likely to hold.

If the support level does hold, traders may see this as a signal to enter a long position, with the expectation that the price will rise. If the support level is broken, this may be seen as a bearish signal, and traders may choose to exit their long positions or even enter short positions to take advantage of the expected downtrend.

Overall, the concept of support is important in trading because it helps traders identify potential entry and exit points for their positions, manage risk, and make more informed trading decisions.

Support levels can be further classified into different types based on the number of price levels that are considered to be significant. Here is a brief explanation of the different types of support levels:

Single support level: A single support level refers to a specific price level at which buyers are expected to enter the market and create demand. This price level is often identified by technical analysts using charting tools such as trend lines, moving averages, or horizontal support and resistance lines.

Multi-support level: A multi-support level refers to two or more price levels that are considered to be significant in providing support to the price of an asset. These levels may be identified using the same technical analysis tools as a single support level, but they are considered to be stronger indicators of support because they are based on multiple price levels.

Support zone: A support zone is a range of price levels where buyers are expected to enter the market and create demand, thereby preventing the price of an asset from falling further. The boundaries of a support zone are not fixed and may be identified by technical analysts using various methods such as Fibonacci retracements, chart patterns, or volume analysis.

Multi-support zone: A multi-support zone is a combination of two or more support zones that are identified using different technical analysis tools. This type of support level is considered to be the strongest indicator of support because it is based on multiple price levels and different types of technical analysis.

It is important to note that the identification of support levels is not an exact science and may be subject to interpretation. Traders often use a combination of different technical analysis tools and methods to identify support levels and make informed trading decisions. They may also use other factors such as fundamental analysis, market news, and economic data to help confirm their trading decisions.

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About the Creator

Emmanuel Andrew

"I am a blogger and researcher who loves to write content about adventurous experiences and knowledge to share with readers. With a passion for writing and a love of travel, I seek out fascinating new perspectives."

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