What is Support and Resistance in Crypto

When we are trading with cryptocurrencies there are many different things that we need to keep an eye on and track. For this, many people use different indicators and chart patterns, but there are also many other things that can help traders analyze the market. Support and resistance levels are two of these things and many traders use them in their everyday trading activities.

But what are these support and resistance levels exactly and why are they important to know when trading with cryptocurrencies? This is the question that we will be answering in this guide on support and resistance in crypto.

What are Support and Resistance

Support and resistance are indicators, well sort of, that can be used when trading with cryptocurrencies. But calling them indicators will be factually incorrect. These are two levels that indicate the support and resistance prices of a given crypto, just like they do in Forex.

Support is the lower level and it tells us what is the lowest price this cryptocurrency is expected to fall to before it rebounds and continues growing. So for example if the support level for Bitcoin is $16,000 it is expected that if Bitcoin falls to $16,000 it will then reverse and start gaining value once again.

Resistance on the other hand is the complete opposite. It is a price level that shows us the expected maximum price this crypto is expected to go to before it starts losing value. We’ll take a look at Bitcoin’s example once again. Let’s say that the Bitcoins resistance level is $25,000, it means that if the Bitcoins price reaches $25,000 there is a high likelihood that the price will reverse and start falling.

We should also mention that support and resistance levels are not guaranteed to stand. There is always a possibility that support will be broken and the price will continue to fall, or if resistance is broken the price might continue to rise instead of falling.

How to use Support and Resistance Levels in Crypto

There are many different ways to use these support and resistance levels in our trading strategies. One of the most common ways to use these levels is when trading with range. Range trading is a trading strategy in which you set a price range of an asset and trade within this range. In case of support and resistance, whenever the price of an asset comes close to support, you buy this crypto with expectations that the price will go up. Once the price reaches resistance and expectations are that the price will fall, you then sell the asset and take out profits. Then you can open a short position when the price is at the resistance level, and once it falls close to support again you close the short position and take profits. This process is simply repeated.

There is also a crypto trading strategy with which you are looking for the crypto to break the support or resistance level. If you are looking at the charts and you see that support has been broken, it is expected that the price will continue to fall and new support will be created lower than the previous one. In this case, you can open a short position and make profits that way. If we see that resistance has been broken, you can open a long position as expectations are that the price will continue to rise. These are also called “breakouts” and can be very useful for making some extra profits.

But you should know that trading with only support and resistance levels is not advised. It is best to use these levels as supporting tools and always have more technical and advanced indicators and signal provider tools in place to get a more precise idea of market activity and trends.

FAQs on Support and Resistance in Crypto

How do you find support and resistance in crypto?

In order to find support and resistance in crypto, there are many different indicators that directly overlay these two levels on top of your chart. If you are using MetaTrader, you can visit the indicators tab and look for support and resistance indicators. There are also other indicators that can be classified as support and resistance levels.

What happens when the resistance level in crypto is broken?

When resistance in crypto is broken, the price of this token is expected to continue to rise. Whenever resistance is broken and the price goes up, both support and resistance levels also change, unless the broken resistance reverses really quickly.