Support and resistance are two of the most commonly used terms that often come across in bitcoin price analysis. Right now, bitcoin is looming around the price of $3,855 (as per www.coinmarketcap.com) after suffering a major loss in the past few days. In the bitcoin price analysis done today by newsBTC, the major support level stands around $3,500 and the major resistance stands at $4,000.
But if you do not want to go into the detail of what these terms are, here is a simple explanation that will give you a clear insight into what do they signify.
Just like traditional markets, bitcoin is seen going up and down frequently. The market is either going upward, a bullish trend that is, or it is going down, a bearish trend. Now, whenever there is a change in the direction of the market, these terms of support and resistance get used.
If the market is in a bull run and changes direction to go into a bearish run, that’s when we say that the market has met its resistance. Resistance literally means difficulty in going forward. If the market has to go upward, it has to break its resistance levels.
Now, for support, it’s the same as resistance, but in the opposite sense. Whenever the market is going down and changes direction in an upward direction, it is said that the support level is reached. For how long the support levels and resistance levels stay cannot be predicted. Sometimes its hours or days, and sometimes, its months or years.
Whenever the market breaks the resistance level and moves up with much higher resistance now and higher support level than before, we say that it is an up trend for the market. Conversely, if the market breaks the support levels with lower resistance and support levels than before, we say that it a down trend for the market.
The volatility that is shown by the world of cryptos is too much. Prices fickle often with the market going up one day and crashing the next day. Support and resistance levels are always holding the attention of the traders involved in this space. For traders, these levels play a part in figuring out the next move.
The next time when you come across the words support and resistance levels in the market analysis, you will have an idea of what they mean, and what do they signify for the market overall.