Resistance is a line horizontally or slightly sloping on the chart of price movements which is generally a reference for buyers not to buy whose price has almost touched the resistance line. If support is considered the lower limit of the price, then resistance is the upper limit.

Resistance consists of levels where the price of an asset fails to break through due to strong selling pressure. In some cases, the occurrence of resistance levels may also be associated with a large sell wall, which prevents the price from rising further.

So the resistance level is expected to act as a “ceiling”, due to the large supply of sellers in the price area. As such, traders can interpret resistance as a level that can only be crossed with significant buying pressure.

Usually, technical analysts draw resistance lines based on previous highs. Such a technique may be useful when trying to predict a potential price reversal point. In general, resistance levels are depicted as straight horizontal lines, but they can also be described as diagonals. However, diagonals are often referred to as trend lines.

It is important to note that resistance levels, when crossed, tend to become support levels – which is essentially the opposite concept. While resistance lines often act as upper boundaries, preventing price from rising further, support levels act as “floors” that tend to hold price above them. Usually, good trading opportunities arise when resistance or support levels are broken.

Support and Resistance are interconnected and have benefits that are divided into the following 3 things:

1. To Show Occurrence

Trend Support and Resistance can indicate the start of a trend, after the price has broken one of these limits. In general, a confirmed breakout of support can initiate a downtrend, while a valid breakout of resistance often initiates an uptrend. By knowing when a trend occurs, the risk of loss due to the origin of Open or Close positions can be avoided.

2. To Determine the Entry Position

If you rely on Support and Resistance, then the entry position is usually determined after the price closes above or below the SR. If the price has failed to break through Support, for example, a buy entry can be made after the price has closed above Support. Meanwhile, if the price seems to have broken through Support, then you should not enter sell before the price is completely closed below Support to confirm the breakout.

3. To know the exit position

Support and Resistance can be used as an exit benchmark, especially in terms of determining Stop Loss and Take Profit. Suppose we have outlined Support and Resistance on the chart, then a buy entry in the Support area can target the Resistance level as a Take Profit target. Meanwhile, if the price turns out to be a downward breakout, then you can look for the next Support as a Take Profit target, and use the Support that has been broken earlier as a Stop Loss area.