Support
Support Key Points
- Support is a crucial term in the world of trading, including cryptocurrency trading.
- It refers to a price level where a cryptocurrency is expected to stop declining and possibly bounce back.
- Support levels can be identified by analyzing historical price data and identifying points where the price has stopped falling in the past.
- The principle of support is based on market psychology and the behavioral economics theory of supply and demand.
- Breaking a support level is viewed as a bearish indicator, suggesting the price may continue to fall.
Support Definition
In the realm of cryptocurrency and blockchain, ‘Support’ is a term used in technical analysis to describe a price level at which a cryptocurrency tends to stop falling and might bounce back due to increased demand or decreased supply.
What is Support?
Support is a concept in trading and investing that refers to a specific price level that a cryptocurrency or any other asset is expected to have difficulty falling below.
It is a level where buying interest, due to increased demand or decreased supply, is likely to exceed selling pressure, causing the price to stop falling and potentially bounce back.
Who Uses the Concept of Support?
The concept of support is used by traders and investors who engage in technical analysis.
These can be individuals trading their own funds, professional traders, investment firms, or even algorithmic trading systems programmed to recognize and react to support levels.
When is Support Relevant?
Support is relevant whenever a trader or investor is attempting to predict future price movements, particularly downward trends.
This can be during periods of high volatility, when the price of a cryptocurrency is falling, or during periods of relative stability, when a trader may be looking for buying opportunities.
Where is Support Applied?
Support is applied in the context of price charts and technical analysis.
By examining historical price data on a chart, traders can identify levels at which the price has previously stopped falling, which may act as support in the future.
Why is Support Important?
Support is important because it can provide valuable indications about future price movements.
If a cryptocurrency price falls towards a known support level, traders may expect the price to stop falling and potentially bounce back, providing a buying opportunity.
Conversely, if a price breaks through a known support level, it may be a bearish indicator that the price will continue to fall.
How is Support Identified?
Support is identified through technical analysis, which involves studying past market data, primarily price and volume.
Traders typically use charts to identify points where the price has previously stopped falling and bounced back, which are potential support levels.
The more often a price has bounced off a specific level, the stronger the perceived support is at that level.