Support and Resistance Indicator
Support and resistance are technical analysis terms that refer to areas of supply and demand, which may provide insight into the price action of a security.
What Is Support?
Support is the price level with a concentration of demand, where buyers stepped in previously to buy a stock. On a chart, support levels will appear as the lowest price over a given time period and, in some cases, consist of a series of lows at or near that same level. Price support may halt a decline, at least temporarily. In some cases, price support may lead to a trend reversal.
What Is Resistance?
Resistance — the opposite of support — is the price level with a concentration of supply, where sellers previously became more aggressive. On a chart, resistance levels will appear as the highest price over a given time period and in some cases, consist of a series of highs at or near that same level. Price resistance may halt an advance, at least temporarily. In some cases, price resistance may even lead to a trend reversal.
What Is the Support and Resistance Indicator?
The support and resistance indicator automatically draws zones for both values on the chart, which may give you greater insight into the significance of current price movement.
Why Use the Support and Resistance Indicator?
The support and resistance indicator may help you make decisions about when to open and close trades. Charting the support and resistance levels can give you a visual representation of its supply and demand on the market. This indicator can help you:
- Spot a trading range.
- See transitions in trends.
- Identify continuation patterns.
- Detect gaps.
The analytical tools and strategies described in this article are for information purposes only and their use does not guarantee a profit. None of the information provided should be considered a recommendation or endorsement of any specific investment, tool or strategy. The choice to engage in a specific investment, tool or strategy should be based solely on your research and evaluation of risks involved, your financial circumstances and investment objectives. Securities are subject to market fluctuation and may lose value. Market volatility, volume and system availability may impact account access and trade execution.