Support level

A support level represents a price zone on a chart where the downward movement of an asset's price is historically observed to halt and reverse upwards. This phenomenon occurs because the demand from buyers at this specific price point becomes strong enough to absorb the available supply from sellers. Traders identify these levels by examining past price action, noting where prices have previously found a floor and bounced.

For a retail trader, a support level serves as a potential area to initiate long positions, expecting a price rebound, or to place stop-loss orders for existing short positions. If the price breaks below a significant support level, it often indicates a shift in market sentiment, suggesting that further price declines are possible. Conversely, a bounce off support can confirm an upward continuation or the end of a downtrend.