Resistance Level

A trading resistance or resistance level reflects a given price that acts as a temporary ceiling for an asset.

In its most basic form, this level pressures an asset’s price from rising above it, either acting as an outright barrier or exerting pressure in doing so.

This pressure is due to a growing number of sellers who wish to sell at the particular price at a defined resistance level.

Resistance levels can either be temporary constructs, longer-lasting ones, or purely psychological.

As a result, several factors can control resistance levels or cause these to change over time.

In terms of technical analysis, a simple resistance level can be calculated by drawing a line along the highest highs for the time period being considered.

Resistance differs notably from support levels, which operate inversely.

Understanding the Basics of Resistance Levels

Resistance levels do not have to only be flat lines, but can also represent slanted pricing levels relative to trend lines.

There are both simplistic and advanced ways to calculate resistance levels and doing so forms the foundation of technical analysis.

Any asset trader can map out their strategies or place stop-loss orders in line with resistance levels.

A resistance level equates to the price at which enough traders intend to sell the particular asset, thereby outnumbering the buyers in terms of volume.

As soon as price reaches this potential resistance, the number of sellers increase, preventing price from increasing further.

Resistance presents itself across all timeframes, generally speaking, the higher the timeframe, the stronger these levels manage to hold.