Support and resistance in price action trading refer to specific price levels where a financial instrument is more likely to turn around and change its trend. These levels are established by observing the price movement of the financial instrument over time and can be identified through price patterns, chart analysis, and technical indicators.
Support levels represent areas where buying pressure increases, and are indicated by historical lows or higher lows in an uptrend, or higher highs or historical highs in a downtrend. This suggests that market participants are willing to buy at these levels, preventing the price from falling further.
On the other hand, resistance levels represent areas where selling pressure increases. They are indicated by historical highs or higher highs in an uptrend, or lower lows or historical lows in a downtrend. This suggests that market participants are willing to sell at these levels, preventing the price from rising further.
support zones can act as a resistance zone and resistance zones can act as a support zone after a breakout.
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