In the world of crypto trading, there are many ways to identify opportunities, one of the most prominent methods being technical analysis. This is the study and general breaking down of charts using various indicators and charting patterns. One such technique is known as Support and Resistance strategy.
Understanding Support & Resistance in Crypto Trading
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Support
A support, which is also known as a floor, is the lower horizontal line holding up price at a certain level. You can identify a floor by drawing a line in the area you believe the price hits but rarely moves below. A simple strategy some traders use is buying at the floor because they have seen the markets go up each time price hits that level.
Resistance
On the other hand, a resistance (upper horizontal line) is the ceiling and reverse of the floor. When the market hits a ceiling, prices fall back down towards the floor. Traders sometimes sell when they see the price has hit a resistance.
Breakout
Lastly, traders use these lines to identify opportunities for a breakout. A breakout is where both support and resistance is used to anticipate the point where price escapes consolidation. When the markets break out of the resistance traders normally look to buy. When the markets break out of the floor they look to sell. This strategy signals a shift in price momentum in the direction where the breakout takes place.
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