Definition
Resistance is a concept used mainly during technical analysis for any financial asset, like stocks or crypto assets. When selling interest among traders increases, resistance forms around a crypto asset.
Understanding the term
Resistance and support are utilized together to simplify the technical analysis of an asset’s price level. So to understand resistance, knowing support is important. As prices dip for any particular crypto, there is a surge of interest by traders in buying it. This situation causes a support zone to form on a technical graph, which signifies an opportunity to “buy” certain assets. On the other hand, resistance zones need the exact opposite scenario to form.
Just as support indicates the right time to buy assets like crypto or stocks after careful technical analysis, resistance helps traders determine the right time to sell any financial asset. Crypto markets progress over a sequence of bullish and bearish trends that are technically analyzed before a trader decides to either enter or exit a trading position. Without knowing the support and resistance zones, it would be impossible to find the right moment to buy or sell any financial product.
Takeaway
The formation of a resistance zone is an indication that market participants are selling the asset to avoid losses.