Resistance is a price level where selling pressure exceeds buying pressure, causing the price to stop rising and potentially reverse. Think of it as a price ceiling.
How Resistance Forms
- Price rises to a level
- Sellers enter, buyers hesitate
- Price reverses downward
- If tested multiple times, resistance strengthens
Trading Resistance
Selling at Resistance
- Wait for price to reach resistance
- Look for rejection candlestick patterns
- Enter short with stop loss above resistance
Breakout Trading
- If price breaks above resistance convincingly
- Former resistance becomes new support
- Enter long on the breakout
Types of Resistance
| Type | Description |
|---|---|
| Horizontal | Previous highs |
| Trendline | Along descending trend |
| Moving Average | Dynamic resistance |
| Round Number | Psychological (1.1000, 1.1500) |
Key Points
- The more times tested, the stronger the resistance
- Always wait for confirmation (rejection or breakout)
- Combine with other signals for higher probability
- Round numbers are powerful psychological levels