Support and Resistance on a Chart and Why is Why They are Very Beneficial in Price Forecasting and Trading

When it comes to cryptocurrency trading, there is heavy reliance on proper technical analysis which is key for making the best trading decisions. Support and resistance are very important strategies used during technical analysis as it has proven to be a very reliable and effective strategy for quality entry and exit signals or buy and sell signals. Without a doubt, the support and resistance levels as a technical analysis tool offers a lot of advantages...

Before venturing into any trading of any cryptocurrency asset, traders can make use of the support and resistance levels to figure out trend or price reversals in the market and also break outs. When price breaks out of and goes below its support level, it could mean that there is a continuation of the downtrend or a potential downward price movement. Likewise when the price breaks out of and goes above the resistance level, it could mean that there is a continuation of the upward trend or a potential upward price movement. The support and resistance information on the chart is very important as it can guide a trader on what is going on in the market to make the better trading decisions.

Support and resistance levels is very beneficial in determining the trend in the market depending on the formation of the support and resistance levels. When there is a horizontal support and resistance level, it means that no trend is presence in the market or when the price is moving between the horizontal support and resistance level, it means that the price is ranging. When there is a dynamic support level, it means that there is an ongoing trend in the market which can be uptrend or downtrend depending on the slope of the support and resistance levels. A rising slope shows the dynamic support level in an uptrend price movement, and a falling slope shows the dynamic resistance level in a downtrend price movement. The moving average indicator is a great indicator for dynamic support and resistance levels.

Support and resistance levels can help traders determine areas of high supply and demand in the market or the interest of buyers and sellers in the market as price has shown to react in areas of support and resistance. The supply and demand in the market plays a key role on what happens in the support and resistance levels seen on the chart. Also, the support and resistance information on the chart can be used in combination with other technical indicators like RSI, Moving average, MACD, Volume indicators to better confirmation before entering into any trade.

Trading signals such as entry and exit or buy and sell signals are some of the key advantages of support and resistance and why it is important to locate support and resistance levels on the chart. After the support and resistance levels have been identified on the chart, a trader can decide to place a buy trade after a resistance breakout has occurred or place a sell trade after a support breakout has occurred. Also, the support and resistance levels are a good place to set take profits point when entering a trade.