What is a Level of Resistance?

The price of different financial instruments moves up and down over time depending on the situation on the Financial Markets. 

During an Up Trend, the last high or peak that the price reaches before it starts moving down is called a level of Resistance. Think of it as a sort of ceiling for the price. The price becomes too high to attract more buyers (Bulls) and so sellers (Bears) start to move the price down. 

During a Down Trend, the last low or minimum that the price reaches before it starts rising is called a level of Support. Think of it as a sort of floor for the price. The price becomes too low to attract more sellers (Bears) and so buyers (bulls) start to move the price up.

There are different ways to trade with the help of Support and Resistance Levels. Here are the basic ways: 

Trade the “Bounce”

• SELL when the price reaches a level of Resistance
• BUY when the price reaches a level of Support

Trade the “Break” 

• BUY when the price breaks (moves beyond) a level of Resistance
• SELL when the price breaks (moves beyond) a level of Support