The Concepts of Support and Resistance in Trading

In Technical Analysis, the most significant principles are support and resistance.   It is the foundation by which everything is based. To become an expert at trading, you need to master this.  Support and Resistance are the unseen lines of a stock chart but to an expert eye, they are easily detectable.  Expert traders note these with much attention for the reason that future direction of prices can be defined using these price locations. Support often acts to stop price falls while resistance acts to stop prices from rising higher.  This is the basic principle of Support and Resistance.

How Support and Resistance Works

Investment outcomes can be determined using this principle. It isn’t difficult to grasp.  It works because individuals participating in are predictable and this also makes stocks predictable.  The psychology here is that people remember past events and act based on these events. People tend to follow group actions and this is visible in daily stock market behavior.

Support and resistance gives a trader the framework for identifying balanced trading and will be a first step to becoming a successful trader. You must keep in mind that price movements are impacted by excess market supply and demand. Supply leads to selling while demand leads to buying.

At some point, the levels of Support and Resistance will fail and trading opportunity will be present.  These signals a change in the dynamics of buy and sell behavior. Experts at trading have great respect for this principle behind price movement and quickly pick up on how participants feel about a stock. Good traders understand the psychology whereas inexpert traders will react emotionally and will crack under pressure to exit in a losing position.

To become a good trader, you will need to understand the concepts of support and resistance and their practical application.  You might want to view some free videos and other informative materials regarding trading so you can make more money in the stock market.

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