Support Level

A trading support or support level represents a given price that acts as a temporary barrier for an asset.

In particular, this level ensures an asset’s price will not fall below it or will encounter difficulty in doing so.

All assets can utilize supports, be it forex, equities, commodities, etc. A given asset's support level is created by buyers that enter the market whenever the asset falls to a lower price.

Basic support levels can be calculated and charted by identifying the lowest lows for a time period being considered. This can occur over any period, be it daily, hourly, etc.

A support line can be either flat or skewed up or down relative to the overall price trend.

Looking deeper, other technical indicators and charting techniques can be used to identify more advanced versions of support.

Support levels differ from resistance, which illustrate the opposite direction of price movements.

Understanding Support Levels

When the price of an asset falls towards a defined support level, the asset can either hold at this level or fall further.

In this case, additional supports must be identified to compensate for a breach or decline.

Support levels in many assets can be created by limit orders or simply the market action of traders and investors.

Traders can rely on support levels to plan either entry and exit points for trades, as well as crafting more detailed trading strategies.

For example, if the price action on a chart falls below a support level, it is seen as an opportunity to buy or take a short position.

Additionally, if this breach of the support level occurs during uptrend, it may possibly be a sign of a reversal and strength.