Understanding the Resistance and Support Levels for Better Trades

Crypto trading is just a game of buying digital coins at low prices and sell them at higher prices. However, most investors find the entire process intimidating and complicated. The easiest way to understand your trading strategies is by identifying the asset’s resistance and support levels.

Once you spot these zones, you will improve your exit and entry timing to make the most out of the market. Also, these levels are vital during range-bound, bearish and bullish markets.

Understand these basics first.

What are Support Levels?

Support levels come into play when buyers’ demand absorbs sellers’ supply, preventing extended price downfalls. Bullish investors tend to purchase more at this level, assuming that the attractive prices would drop further.

Meanwhile, bearish traders stop selling, believing that the market may rebound due to drastic drops. When the two scenarios occur, they result in a support level.

Price drops attract buyers, reducing selling. That leads to a rebound as demand exceeds supply.

Although most market players would consider horizontal supports dependable, it is not the only way for support formation. During increasing trends, trendlines serve as supports.

What is a Resistance Level?

You can refer to resistance as the reverse of support. It forms when supply exceeds demand, stumbling the uptrend.

The resistance level comes into play when buyers who bought at low zones begin to book their profits, and antagonistic bears start to short, predicting a pullback after an extended rally. The rally reverses when supply is high than demand.

As the resistance and support regions do not have to be horizontal, it is okay for the zones not to be in one level.

Pinpointing Resistance and Support during Consolidation

On a clearly defined resistance and support, buyers can purchase on a rebound and hold, waiting for prices to rally towards the resistance zone to close the trade. Investors can keep the trade’s stop-loss beneath the range’s support.

Expert traders might hunt the stops several times by dropping the price beneath the range’s support. For that reason, buyers might purchase on uptrends and hold for the asset’s value to close beneath the support level before discarding their positions.

You can utilize the resistance and support levels to execute profitable trades for maximized crypto profits.