Support and Resistance

Basic Technical Support & Resistance

When we make investments in stocks, indices, forex and commodities, analysts and traders expected the ability to read the direction of price movement. For the purposes of these various analysis techniques have been developed and applied, and one important part in the process of this analysis is technical analysis. One of the most useful tools of technical analysis is support and resistance analysis. This is relatively easy to analysis using support and resistance because can improve the accuracy of the analysis of price movements.

Support & Resistance Basics Definition

Support and resistance describes the estimates where the price movements both from the supply and demand reaches equlibrium point. At that range if supply is more excessive then prices will tend to come down from that range and if demand is excessive then prices will tend to increase from that range, and if the forces of supply and demand are relatively balanced, then the price will tend to survive, consolidation or sideways on that range. On other way, excessive supply cause bearish and excessive demand cause bullish.

Support Definition

Support is the price range where in this level or range is estimated that demand is strong enough to hold the price fall down further. Simple logical is that when prices fall closer to the range of support, causing the increased willingness of investors to buy stock, index or a particular currency, and when prices are touching or near the range then demand is estimated will exceed supply so the markdown is hold .However, keep in mind that the range of support does not mean prices will definitely stuck in range, always open the possibility that the range of support can be penetrated or bypassed, which it indicates the increasing supply greater than demand, in this case support is break, so we need to made other support under the previous support.

Resistance Definition

Resistance is a price level where the trend is expected to sell in that range are strong enough to hold the rate of price mark-up. Basic logical is that if the price mark-up is close to the range of resistance, then the trend of trader or investor to sell is increasing. And on the other hand when the price is perceived too high then the tend to buy will be relatively decreased. So when the price touched resitance range, it is estimated that the supply will exceed demand so that would hold price to increase.