Support and Resistance

Support and resistance are two of the most important concepts in technical analysis. These levels represent areas where buying and selling pressure changes and the other take place of the other. The support level is the zone where the price stops the downtrend momentum and reverses the movement back to the top. However, Resistance is the opposite of support. It is a level where the price stops the uptrend momentum and reverses the movement back to the bottom. In simple words, support and resistance are horizontal levels that serve as boundaries where the price

has bounced more than once.

In the following chart, the newly created support and resistance level has been drowned in green and red colors. Click on "Show More Candles" to see how the price reacts to these levels.

GBPUSD, Daily chart (2022 - 2023)

Support levels are created when buyers are willing to step in and purchase an asset at a particular price level, indicating a sense of confidence or optimism about the asset. Conversely, resistance levels are created when sellers are willing to sell an asset at a particular price level, indicating a sense of caution or pessimism about the asset.

The psychological reasons behind support and resistance levels can be based on human emotions of fear and greed. When prices are falling, fear can lead investors to sell, creating a support level as buyers step in to take advantage of lower prices. On the other hand, when prices are rising, greed can drive investors to buy, creating a resistance level as sellers step in to take profits.