Trade Using Support and Resistance Levels
The prices of financial instruments move based on supply and demand. When investors believe the value of an asset is low relative to expectations, they will purchase it in the hope that it will eventually move higher. Pent up demand for an asset will generate price stability and eventually pinpoint a price level in which market participants will buy that asset. Levels of demand for a financial instrument are referred to as support levels. When prices have difficulty moving lower, levels that reject further downward pressure are referred to as support. Support and resistance levels are a widely used by many financial institutions in determining future price movements.
Support levels may be measured by prices, along with other metrics such as trend lines, moving averages and other technical indicators such as Bollinger Bands™.
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