Head and Shoulders Pattern This is an important point to remember because it will help answer many of the questions you may have about how support and resistance work and why do they matter. Another note we would like to address trading on binary options levels the fact that sometimes the terms supply, bearish, bears and selling are used as synonyms. In the same way, the terms demand, bullish, bulls and buying can be used as synonyms.
If you happen to read something about bears and bulls in the same context, then it probably has to do with selling and buying. But enough introductions — what are support and resistance and what do they have to do with supply and demand?
What is support? As weve already established, market values are driven by the levels of supply and demand. When a market value of an asset is relatively low but there is a high enough demand to prevent it from decreasing any further, we have a support. This is easy to imagine — as the price of an asset drops, more people are willing to buy because of the lower prices hence the demand increases.
However, with lower prices, sellers are less inclined to sell. The support is the level where the two trends meet.
However, it is quite possible for a support to be broken after it has been established for one reason or another. If the sellers are willing to sell at even lower prices, for example, then the level of the support has to be decreased a new support needs to be established. Where is support established? In a vast majority of the cases, supports are below the price of the asset at the moment, but its not unheard of for a security to trade at financial values near the support level.
Support And Resistance Lines Explained
Its sometimes difficult to establish the exact support levels due to the inherently complicated nature of technical analysis. What is resistance? Resistance is the polar opposite of support. If the price of a security is relatively high but the supply levels are high enough to prevent it from rising any further, then we have a resistance.
Even though the price is a bit high, buyers are still willing to make purchases. The level of resistance is established where the two trends meet.
- They are plotted on a chart to help determine the direction in which asset prices are likely to head.
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The idea in the end is that the result will be higher supply than demand, thus preventing the eventual rise of the price any further. Just like with support, it is quite possible for the trend to be broken, signaling that the buyers are more willing to make purchases even though the price trading on binary options levels high.
In this case usually a new resistance has to be established. Where is resistance established? Just like supports are usually below the current price, resistance is above it.
Why Support And Resistance Lines Are Important
However, its common for a security to trade at financial values near the resistance levels. Everything weve said about supports holds true about resistance, only on the other side of the spectrum. Author: btadmin TradingPedia.
SnR Level Strategy for binary options - Support \u0026 resistance level trading.