Support and Resistance Defined
The Traders Decisions at S & R Areas:
This is a function of how we are wired as humans.
The decisions to buy or to sell are made by analyzing the current price against previous areas which cause an emotional response to traders.
They fear of missing out of on opportunity so they either buy or sell at these areas of support or resistance.
So the support area is basically summed up as the demand overcomes the supply limiting the price to go down any further.
Then resistance, is the area with the supply has been overcome with demand which limits an upward price movement.
That is were you see a ‘Barrier” form.
You will sometimes notice that a support/resistance area isn’t exacly a straight line which is why it is called an area. What happens is traders will make different decisions at different prices in this area.
Never assume these areas will hold, however, they should always be areas of interest and you should take note of it when you see them.
This is a function of how we are wired as humans.
The decisions to buy or to sell are made by analyzing the current price against previous areas which cause an emotional response to traders.
They fear of missing out of on opportunity so they either buy or sell at these areas of support or resistance.
So the support area is basically summed up as the demand overcomes the supply limiting the price to go down any further.
Then resistance, is the area with the supply has been overcome with demand which limits an upward price movement.
That is were you see a ‘Barrier” form.
You will sometimes notice that a support/resistance area isn’t exacly a straight line which is why it is called an area. What happens is traders will make different decisions at different prices in this area.
Never assume these areas will hold, however, they should always be areas of interest and you should take note of it when you see them.
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