A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.
Usually, the markets prove unwilling to let an asset drop below its support level, with buyers stepping in to raise the asset’s price higher again. That makes them the opposite of resistance levels: the point at which the markets prove unwilling to let an asset’s price rise any higher.
If an asset does move below its support level, then that support level is either wiped out – and a new support level must be identified – or reconfirmed, if lots of traders buy the asset.
Knowing where an asset’s support and resistance levels are can help traders choose the best time to enter a market, as well as where to put stops and limits.
