What are Supports and Resistances? And How to identify them?

Introduction:-
Supports and resistances are two of the most important concepts in the technical analysis of stock markets. They refer to price levels at which the market either finds strong support or encounters strong resistance and in turn, are used to predict potential price movements. These two terms are so important in the stock market because they can provide investors with valuable insights on how to buy and sell stocks.

In this article, we will cover the definition of supports and resistances, as well as how to identify them and their benefits. We will also discuss common mistakes to avoid when identifying supports and resistances, and provide a summary of the article.

What are Supports and Resistances?

Support and resistance levels are important concepts in technical analysis, which is used by traders to identify potential price reversal points. Support is the price level at which demand is seen as strong enough to prevent the price from declining further. Resistance is the price level at which selling pressure is seen as strong enough to prevent the price from rising further.

Support and resistance levels can be identified in three ways:

✔ Chart patterns – chart patterns, such as head and shoulders, double bottoms, and higher highs and higher lows can be used to identify support and resistance levels.

✔ Support and resistance lines – support and resistance lines are created when the price of a security bounces off a certain level multiple times.

✔ Volume data – volume data can be used to identify key support and resistance levels. High volumes indicate strong support or resistance and can be used to identify potential points of trend reversal.

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