Support and Resistance Levels

Support and Resistance levels is one of the most widely used concepts when it comes to trading Bitcoin cryptocurrency online. Support and resistance levels are also commonly used in trading other financial instruments such as Forex Currencies, Stock Indices, precious metals such as Bitcoin and Silver and Commodities.

Support and resistance levels that form on the Bitcoin price chart tend to act as barriers that prevent the price of Bitcoin getting pushed beyond a certain point in a particular direction.

Support Level

As the name suggests this level supports price against moving lower beyond a particular price point.

A support level prevents the price of Bitcoin from getting pushed downwards beyond this particular level. Therefore, this support level is regarded as a floor for the Bitcoin price as it prevents the market from moving downwards past a certain point.

Support Level - Bitcoin Technical Analysis

On the example above the price moved down until it hit a support level. Once the Bitcoin price hits this level it slightly bounced back up and then resumed going down again until it hit the support level and bounced up again.

This process of hitting the support level and then bouncing back is called testing the support level.

The more times a support level is tested the stronger it is, in the example above the support level was tested 3 times without breaking after which the market downward trend finally reversed and started moving in the opposite direction.

Once this level has been determined on the Bitcoin trading chart, then traders use it to place their buy orders and at the same time put a stop loss order just a few pips below this level.

Resistance Level

Resistance level is a level that prevents the prices of Bitcoin from getting pushed upwards above a particular level. This level can therefore be regarded as a ceiling for the price because this level prevents the market price from moving upwards beyond this point.

Resistance Level - Bitcoin Technical Analysis

On the example shown above the price of Bitcoin moved up until it hit a resistance level. Once the Bitcoin price hit this level it retraced and then resumed moving up until it hit the resistance level again.

The resistance level was tested 5 times without breaking, the more times a resistance level is tested without breaking, the stronger it is.

Once this resistance level has been determined, Bitcoin traders will use this level to place their sell orders at this level and at the same time put a stop loss order a few pips above this resistance level.