The level where the price has difficulty moving up is called resistance. Visually, if the peaks created by the price in the past can be combined with a horizontal line, resistance occurs. If the resistance levels are drawn successfully, there might be opportunities both for buying and selling.
As a matter of principle, it is believed that the price that comes to the resistance level will be forced to go up and it is accepted that the price that touches the related resistance will go down and decrease. This is why it is thought that the price that reaches the resistance level will create a signal for selling. For the selling positions to be opened, the stop the loss point should of course not be forgotten. In case the price doesn’t go back and breaks the level, the risk is limited by putting a stop the loss order a bit above the resistance level.
As can be understood from the paragraph above, when the resistances are broken, the price might go up and proceed that way for a while. In this case, there might be an opportunity for buying. When the price breaks the resistance, it might go up rapidly. In this case, there is a buying order to the point where the resistance is broken. In case the price goes back and goes below the resistance, the risk is limited by putting a stop the loss order a bit below the resistance.
So it can be understood that when you think the price is breaking the resistance and moving forward, it can come back and go below the resistance. This is called the “bull trap”. You need to be careful against that and pay attention to the stop loss levels recommended.
Another thing to know about resistance is that the broken resistance can work as support. If the price breaks a level for certain, that level becomes the level the price has difficulty passing while falling which becomes the support. In this situation, there are new resistance levels appearing above. In such a case, you might look for buying opportunities in line with the rules of support levels.
Below, there are some examples regarding some resistance levels.
