Lesson 3 of 5 · 5 min read
Support & resistance
The floors and ceilings that prices react to.
Floor and ceiling
Support is a price level where the price keeps bouncing back up (buyers step in). Resistance is the opposite: a level where the price keeps stalling (sellers step in).
Why it works
It's partly psychology: many people place orders at 'round' or previously tested levels. The more often a level is tested, the stronger it usually is.
Breaks
If the price breaks through resistance, that old resistance often becomes the new support (a flip). A break on high volume is more convincing than one without.
Remember this
- Support = floor (buyers step in), resistance = ceiling (sellers).
- The more often a level is tested, the stronger it usually is.
- Broken resistance often becomes the new support (a 'flip').
- A break on high volume is more convincing than one without.
There is a quiz for this lesson
2 questions that check whether it stuck. They live in the app, because a quiz nobody grades teaches nothing.
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