Support & Resistance Zones

This is one of the most widely used concepts in stock indices trading and it refers to levels on a stock chart that tend to act as barriers that prevent the price of an asset from getting pushed beyond a particular point in a particular direction.

Support

This level stops the price of an asset from getting pushed downwards and thence it's regarded as the floor because it halts the market from moving downward past a certain point.

Example:

On the illustration explained and illustrated and shown below you as a trader can see that stock trading price moved down until it hit a support

Once price hit this technical level it slightly bounced back upward, then resumed going downward until it hit the support again.

This process of hitting a level and bouncing back is called testing the support.

The more times a support is tested and the market bounces up the stronger it is - the illustration explained & illustrated below this level was tested three times without breaking. Finally the market trend reversed & started heading in in the opposite trend direction.

Once this level has been decided traders use it to place their stock orders to buy indices at the same time putting a stop loss a few pips below it.

Support level on a indices Chart - Index Support and Resistance Levels: Examples on Chart

In the above exemplification the market did not move below this area. It is an area where price can not break lower.

These regions form good points where price trend in a downward trend is likely to reverse and get support & begin heading upwards.

The demand to buy indices at this point will be greater & therefore providing a good point to begin a buy trade, while placing stop losses some pips just below.

This support is also use by short indices sellers as a target where to set their take profit for their short sell indices trades.

This is another reason why the trend is likely to reverse or consolidate at this level because once the sellers close their sell stock trades then momentum of the downward indices trend reduces and a consolidation will happen after which the direction is likely to reverse.

Resistance

This level stops the price of an asset from getting pushed upward these levels are therefore regarded as the ceiling because these levels prevent the market from heading upward

Example:

On the illustration explained & illustrated below you as a trader can see that stock price moved up until it hit a resistance.

Once price hit this technical level it retraced slightly then resumed going and heading upward until it hit the resistance again.

The resistance holds & is tested five times without breaking/giving in.

More times a resistance level is tested the stronger the it is.

Once this level has been decided traders put their stock orders to sell at this level and at the same time putting a stop loss a few pips above it.

Resistance levels on a indices Chart - Indices Support and Resistance Levels: Examples on Chart

In the above exemplification the market did not move above this area. This region shows an area where price can't break above.

These levels form good points where a indices price in an upwards trend is likely to reverse after some resistance & start moving downwards in in the opposite trend direction.

This highlights that the demand to sell indices at this region will be greater & therefore providing a good point to begin a sell trade, while placing stop losses some pips just above this level.

This resistance level also is used by the buyers(bulls) as a target where to place and set their take profit orders for their bullish trades. T

His is another reason why the trend is likely to reverse or consolidate at this level because once the buyers close their buy stock trades then momentum of the upward trend reduces and a consolidation will happen after which the direction is likely to reverse & start moving down.

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Trade Stock Indices

Support & Resistance Zones

Support

Resistance