Can you explain the concept of support and resistance levels in technical analysis and how they are used to make trading decisions?

1 Answers
Answered by suresh

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Explanation of Support and Resistance Levels in Technical Analysis

Can you explain the concept of support and resistance levels in technical analysis and how they are used to make trading decisions?

Support and resistance levels are significant price levels in technical analysis that represent historical turning points in a security's price movement. Support level is a price at which a stock tends to stop falling and find buying interest, preventing it from dropping further. Resistance level, on the other hand, is a price at which a stock encounters selling pressure and struggles to move higher.

Traders use support and resistance levels to identify potential entry and exit points for trades. When a price approaches a support level, traders may see it as a buying opportunity with the expectation that the price will bounce back. Conversely, when a price approaches a resistance level, traders may consider selling or shorting the security as they expect the price to decline.

By analyzing support and resistance levels along with other technical indicators, traders can make informed decisions about when to buy or sell a security, manage risk, and set profit targets.

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Answer for Question: Can you explain the concept of support and resistance levels in technical analysis and how they are used to make trading decisions?