What are support and resistance levels in stock trading?
Support and resistance are key price levels in technical analysis that help traders identify potential entry and exit points.
- Support Level: This is the price level where a stock tends to stop falling and bounce back up due to increased buying interest. It acts as a floor preventing further decline.
- Resistance Level: This is the price where selling pressure increases, preventing the stock from rising further. It acts as a ceiling, causing price reversals.
When a stock breaks above resistance, it may signal an uptrend, while breaking below support may indicate a downtrend. Traders use these levels to plan their trades effectively.
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