What are support and resistance levels?

Support and resistance levels are price points on a chart where the direction of an asset trend is likely to pause or reverse. Support acts as a floor for the price, representing a level where buying interest is strong enough to overcome selling pressure. When an asset price drops to this level, traders often expect a bounce upward. Resistance acts as a ceiling, representing a level where selling pressure is strong enough to overcome buying interest. When an asset price rises to this level, traders often expect a pullback. These levels are identified by looking at historical price data. If an asset repeatedly fails to break below a specific price, that price is considered a support level. If it repeatedly fails to break above a price, that price is considered a resistance level. Traders use these zones to determine entry and exit points for their positions. Once a price breaks through a resistance level, that level often becomes the new support level. Conversely, a broken support level may become the new resistance level. Trading involves significant risk, and these levels do not guarantee future price movements. Market participants should always use stop-loss orders to manage potential losses.