Support and Resistance Levels

Support & Resistance levels is one of the most widely used concepts when it comes to trading BTCUSD Crypto Currency bitcoin crypto currency trading online. Support and resistance areas 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 which 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 Area

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

A support zone prevents the market price of Bitcoin from getting pushed downward 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 Analysis

On the above example the market price moved down until it hit a support zone. Once the Bitcoin price hits this level it slightly bounced back up and then resumed going down again until it hit the support zone 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 zone is tested the stronger it is, in the above example the support level was tested 3 times without breaking after which the market downwards trend finally reversed and started moving in the opposite trend direction.

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

Resistance Zone

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 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 heading up until it hit the resistance area 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 area has been determined, BTCUSD Crypto traders will use this level to place their sell orders at this level and at the same time put a stop loss order a couple of pips above this resistance level.

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