Using support and resistance to trade

Support is defined as a price level that may prompt a net increase in buying activity. It is a price point at which new buyers emerge. 

This means that the price is more likely to ‘bounce’ off this level rather than break through it. However, once the price has passed this level by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

Resistance can be defined as a price level that may prompt a net increase in selling activity. It is a price point at which new sellers emerge.

This means that the price is more likely to ‘bounce’ off this level rather than break through it. However, once the price has passed this level by an amount exceeding some noise, it is likely to continue rising until it finds another resistance level.

 Nifty 50 between December 2018 and August 2020

            Support and resistance can be used as points of entry or exit.