First things first
At any given time a trader has three options: buy; buy long, sell; sell short and stand aside; refrain from participating in the market. Understanding the ebb and flow of the market is better done by analyzing the price action, as well as the levels in the market where price bounced higher or turned down – these are commonly known as support and resistance.In other words it can be said that ‘support and resistance form the foundation of technical analysis which helps traders to build a framework to better understand the financial market.’
Definitions
One of the established definitions of support – as buying, either actual or potential in sufficient volume to prevent any further downward movement in price for an appreciable period. Similarly, resistance; exact opposite of support, is defined as selling, either actual or potential, in sufficient volume to satisfy all bids, thereby....
