What is Resistance?

Resistance Definition. Resistance is a term used in technical analysis to describe a price level in a stock, commodity or currency where selling pressure for the asset exceeds the momentary buying pressure, forming a ceiling that blocks future price movements in the upward direction. The opposite of resistance is Support. Similarly, it is the level where buying pressure begins to exceed selling pressure, thereby establishing a floor beneath which prices will not fall. Technical analysts have developed many tools to ascertain these levels since they signal appropriate entry and exit points that a forex trader will use to his advantage. Many forex traders rely on various wave theories that project these levels at varying points on a pricing chart of the currency. Proponents of Elliott Wave Theory use proportional retracement ratios, sometimes based on Fibonacci intervals, to determine consistent projections for both resistance and support. The wise forex trader then places orders based on these price forecasts to profit from these expectations. Software has been developed that performs the necessary calculations. Typically, resistance, support, pivot points and midpoints are displayed (abbreviations are R, S, P, and M), as in the following example:

Resistance Chart

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.