Support
Support is an area on a chart that price has dropped to but struggled to break below. The diagram above shows how price drops down to the area of support and subsequently ‘bounces’ sharply from this level.
In theory, support is the price level at which demand (buying power) is strong enough to prevent the price from declining further. The rationale is that, as the price gets closer and closer to support, and becomes cheaper in the process, buyers see a better deal, and are more likely to buy. Sellers become less likely to sell, since they are getting a worse deal. In that scenario, demand (buyers) will overcome supply (sellers) and that will prohibit price from falling below support.
Support is an area on a chart that price has dropped to but struggled to break below. The diagram above shows how price drops down to the area of support and subsequently ‘bounces’ sharply from this level.
In theory, support is the price level at which demand (buying power) is strong enough to prevent the price from declining further. The rationale is that, as the price gets closer and closer to support, and becomes cheaper in the process, buyers see a better deal, and are more likely to buy. Sellers become less likely to sell, since they are getting a worse deal. In that scenario, demand (buyers) will overcome supply (sellers) and that will prohibit price from falling below support.