Support and resistance are among the most important technical analysis elements when trading. At www.champion-trader.com we say that support is a zone at which a security is likely to stop falling, at least temporarily, and resistance is a zone at which price is likely to stop rising. Trading support and resistance are not precise lines on the chart, but ‘zones’ within which the market action intensifies. Support and resistance are essentially price bands where the price will probably stop falling or rising respectively.

Support is defined as a price level below which it is supposedly difficult for a security or market to fall. That is, the price level at which a security tends to stop falling because there is more demand than supply can be identified on a technical basis by seeing where the security has bottomed in the past.

Resistance is defined by analysts at www.champion-trader.com as a price level above which it is supposedly difficult for a security or market to rise. Price ceiling at which technical analysts note persistent selling of a commodity or security . Opposite of support level.

Because of their widespread use in all financial markets, trading support and resistance are usually the best indicators for day trading. Many of the most successful day traders learn how to calculate and use support and resistance exclusively in trading. Support and resistance levels can be applied in any timeframe, and you can often see a long term chart displaying obvious areas beyond which price seems reluctant to venture. The cFREE support and resistance charts at www.champion-trader.com are daily charts, the most important timeframe for most traders. If you can identify the support and resistance levels on a chart while trading, you can figure out where to jump in with the entire weight of the market behind you, should that price be broken.

Support and resistance represent key junctures where the forces of supply and demand meet. In the financial markets,asking prices are driven by excessive supply and demand. Supply means with bears and selling. Demand is synonymous with bulls and buying. As demand increases, prices advance and as supply increases, prices decline. When supply and demand are equal, costs move sideways as bulls and bears battle it out for control. Analysts at www.champion-trader.com say that support in this case is the price level at which demand is thought to be impressive enough to prevent the price from declining further.

The logic dictates that as the price declines towards support or gets cheaper, buyers become more inclined to buy meaning sellers become less inclined to sell. The logic dictates that as the price advances towards resistance, sellers become more inclined to sell so buyers become less inclined to buy. By the time the price reaches the resistance level, it is believed that supply will overcome demand and prevent the price from rising above resistance.

After a resistance level is penetrated, it often becomes a support level - that is because buyers who didn’t buy at that price before it went up are now willing to buy at that price. The concept of SUPPORT AND RESISTANCE is essential to understanding and interpreting the markets. Just as a ball bounces when it hits the floor or drops after being thrown to the ceiling, support and resistance define definite boundaries for rising and falling prices. Support defines that level where buyers are strong enough to keep price from falling further. Resistance, according to www.champion-trader.com, defines that level where sellers are too strong to allow price to rise further. In an uptrend, support is where a pullback from a rally should end. In a downtrend, resistance is where a pullback from a drop should end.

Those prices where serious buyers or sellers entered the market in the past will tend to generate a similar mix of participants when price again returns to that level. When price pushes above resistance, it becomes a new support level. When price falls below support, that level becomes resistance. When a level of support or resistance is penetrated, price tends to thrust forward sharply as the crowd notices the breakout and jumps in to buy or sell. When a level is penetrated but does not attract a gang of buyers or sellers, it often falls back below the previous support or resistance. This failure is known by users of www.champion-trader.com as a fakeout. The length of time that a support or resistance level exists helps to determine the strength or weakness of that level. The strength or weakness determines how much buying or selling interest will be required to break the level. Also, the greater volume traded at any level, the stronger that level will be. Levels in longer time frames are stronger than those in shorter time frames.

About the Author

www.champion-trader.com is the most important resource for free information on how to trade support and resistance. Also supplied are free support and resistance levels for every stock on the planet. No need to type numbers into a calculator, just click your favorite stock symbol to see the levels for it instantly, and FREE!

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