Support & Resistance

Support and Resistance

One of the most important principles involved in understanding chart analysis, and subsequently profitable trading, is support and resistance. 

DEFINITION:

Support is a price level to which prices tend to descend but not pass through.

Resistance is a price level to which prices tend to ascend but not pass through.

You may think of resistance levels as the flip side of support.  A line of resistance acts as a ceiling to prices rather than a floor as does support.  Resistance is shown as a stock price is elevated to a level that cannot be sustained due to selling.  It is the level at which profits are taken, or short positions opened by a large enough contingent of stockholders to drive the prices back down.

By watching for levels of support and resistance, you will find that natural trade entry and exit points will become far more apparent to you.  Take a look at the following video on Support and Resistance, presented by Stephen Cooper:

Workshop: Support and Resistance

Find levels of support and resistance on four charts of your choice.  You may want to discuss your results in the War Room of OnlineOption.com.