Resistance level is a price point on a chart in trading and forex that indicates the highest price an asset reaches during a specific period. The opposite of a resistance level is support level, which represents the lower boundary of a price channel.
Breaking a Resistance Level
A resistance level is broken when the price moves upward. Typically, a strong resistance level causes the price to stop near it, unable to break through (rejection), or it may break through on the first attempt. After breaking resistance, the price often experiences a significant increase.
In market terminology, bulls (traders betting on price increases) push prices higher, while bears (traders betting on price decreases) push them lower. Therefore, if the price faces difficulty moving higher at a certain level, it is said that ‘bears are offering resistance.’
Once a resistance level is broken, it often becomes a support level in the future.
Learn more about support and resistance levels.
FAQ
What is a resistance level in trading?
A resistance level is a price point on a chart where the price tends to face selling pressure and may reverse direction.
How does a resistance level work?
A resistance level acts as a ceiling for the price, often causing it to bounce back down after reaching that level.
Why is breaking a resistance level important?
Breaking a resistance level can signal a potential upward trend, making it a key indicator for traders looking to enter long positions.
