What Are Support and Resistance?

Support and resistance are certain barriers which controls the movement of the price of a stock or a security. These are the levels from where the movement of this price tend to stop or reverse back.

A support is a price level from where the price likely to recover again its advance position. However if the price passes this level, it is likely to continue downfall until it find its next support.

A resistance is the opposite of a support level. It is the level where the price tends to find the Resistance as it is Going Up.

Basically Support and resistance represents key junctions where the forces of demand and supply meet. When the demand is more market likely to go up and resistance acts as the point where supply is thought to be strong enough to prevent the rising the price.

In the same way when supply is more market is likely to go down and support acts as the point where demand is thought to be strong enough to prevent the downfall of the price.

The logic is that when the price start to decline and moves towards the support line getting cheaper, buyers become more inclined to buy and sellers become less inclined to sell.

When the price start to rise up and moves towards the resistance line, the seller becomes more inclined to sell and the buyers becomes less inclined to buy. Here one thing should be noticed that once levels of support of Resistance get violated (i.e. The price passes the certain resistance or support level ) then invariably these reverse their roles and the previous support becomes resistance and previous resistance becomes support.