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Support and Resistance are levels where buyers and sellers show big interest at. Traders look level of price in the past, when price reaches it(see also channels). This level can hold or suspend the price, so in future we may expect the market players to react the same way.
Support and Resistance is one of the most widely used concepts in trading. As trend lines are formed form connecting low or peak, the same principle is here but slightly different.
Every low is potential support and every peak is potential resistance. Here is an example of basic support and resistance:
Supports and Resistance are horizontal lines. To draw a Support or Resistance it’s necessary the trend line passes two static points of lows or peaks.
The more points trend line passes more valid is the area of resistance or support and have higher influence of price movement. The more often price tests a level of resistance or support without breaking it, the stronger the area of resistance or support is.
Once a price broken, the level of resistance, that resistance could potentially become support, support and resistance take a huge part in market analysis.
The chart below show minor, strong and major supports and resistance:
