Support and Resistance lines
Support and resistance are key concepts used in technical analysis of assets, including crypto assets.
Support is a price level, where a downtrend can be expected to pause due to a concentration of demand or buying interest. As the price of an asset drops, demand for the asset increases, thus forming the support line. And vice versa. Resistance zones arise due to selling interest when prices have increased.
Finding support and resistance areas can be tricky. Generally, support area forms around the previous price lows, while resistance area forms around the previous price highs.
Our platform automatically identifies a support or resistance area, when there are a minimum of three touching points at a specific price level. Key levels can have up to 10 touching points. And the more touching points a price level has, the more significant the level turns out to be . It is how the theory of support and resistance goes, but it also makes logical sense. Every time that a level is tested or touched, but not broken, the market confirms that it is not prepared to go lower than that price. The more often it happens, the more likely it seems that it will happen again.
Once an area of support or resistance has been identified, those price levels can serve as potential entry or exit points.