While understanding technical analysis i came to know about support and resistance but I can’t clearly differentiate between these terms.Could anyone help me to understand these terms better.
In the thumbnail I have found an example of resistance turning to
support.
Resistance occurs when a price cannot break through a level, as
it’s name implies “resistance” to upward movement.
Support is the opposite.
In simplest terms, resistance is an area that price is having a hard time getting higher than, and support is an area that price is having a hard time getting lower than.
If you tried to jump to the sky from your house you would encounter resistance from your ceiling, and then you would encounter support from your floor when you fell back down… Make sense??
Support Levels
A price level at which you would expect buying to take place.
Resistance
A price level at which you would expect selling to take place.
Regards!!!
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I’ll add my two pips to what the previous posters have said.
Support and resistance levels are always defined in relation to where the price is [B]right now[/B]. Support levels are always below the [B]current price[/B], and resistance levels are always above the [B]current price[/B].
Obviously, when the price penetrates (breaks through) one or more of these levels, things change. The penetrated support, or resistance, levels get re-labeled: [B]broken support becomes future resistance, and broken resistance becomes future support.[/B]
And finally, it’s more accurate to think of [B]support and resistance zones[/B], or areas, rather than pin-point price levels. Sometimes prices will move exactly to a previous support or resistance line and stall completely. But, more often, prices will stall, retrace or reverse [B]somewhere close[/B] to the support, or resistance, line which you have drawn on your chart.
Clint[B][/B]
and if you want to watch how price can react to support and resistance in real time, just watch “psychological” levels associated with large figures.
Say on the EUR/USD you’d watch the price action around 1.3900 and 1.4000 if you were watching it on Friday.
I wouldn’t recommend trading them just yet, but it’s good for learning, and people are never going to stop clustering their orders around those round numbers. Later you can take what you’ve learned about support/resistance price action and apply it to whatever other strategy you want to use.
You can also watch a support/resistance indicator.