This is part 7 of the tutorial. In this video, you will learn about support and resistance.
The equation of demand and supply, the battle between bulls and bears, is what creates the market. When the bulls are in control, demand and consequently price, increases. When the bears are in control, supply and consequentially price, decreases. What makes the price go up is the presence of large buying orders (more buyers than sellers). What makes the price go down is due to more sellers than buyers. When price moves sideways there is equal strength between buyers and sellers. This sort of equilibrium between the bulls and bears maintains the price within a specific trading range. When the bulls gain control over the bears, the price will break out of the sideways trading range and will start moving up. On the other hand, when the bears gain control over the bulls, price will break out of the sideways trading range and will start moving down.
When strong buying occurs around a specific price level, preventing the price from dropping even further, that price level is referred to as support. The support level is an area where buyers are expected to take control over price action. The logic behind the support is that when the price drops down to a certain price level, it attracts interested buyers and discourages sellers from selling at a lower price. Support levels are generally located below current price levels. The line at the bottom represents support. When strong selling occurs around a specific price level, preventing the price from rising even further, that price level is referred to as resistance. The resistance level is an area where sellers are expected to take control over price action.
The logic behind resistance is that when the price increases up to a certain level, sellers are more inclined to sell and cash in, and buyers are less interested in purchasing. Resistance levels are generally located above current price levels. The line at the top represents resistance. Usually price trades near the support and resistance levels. Therefore, instead of thinking support and resistance levels, it is at times more appropriate to think support and resistance areas or zones.