What is the significance of support and resistance zones?

Hi Benjamin,

Support and resistance zones are market levels where prices are likely to reverse. True to its name, a supports zone supports the price and prevents it from dipping further while a resistance zone resists price increments. Another distinction is where they form on a chart.
Appearing beneath the price, support levels indicate a possible upside swing. Conversely, resistance levels appear over the market price and hint at a downside reversal. In most cases, investors with brief holding periods have smaller stops.
The idea is getting as close as possible to the reversal to optimize the tiniest stop available while catching the upside. This is unlike long investors who prefer wider stop losses, so slight price swings do not eject them.
Sometimes, the market defies the support and resistance to form new reversal points. This calls for reliable risk management strategies. Such scenarios are common during directional uncertainty and depend on the strength of the price movement.
It’s not uncommon to lose your capital after following a false breakout. That’s why experienced investors wait for pullbacks before jumping on a trade.