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  1. Forex glossary terms and definitions
  2. Resistance Level

Resistance Level

A "Resistance Level" in financial trading is a price point at which an asset's price tends to stop rising and may start to decline. This level is identified based on historical price data and is often used in technical analysis. The resistance level is created by the collective mindset of market participants. When the price of an asset approaches this level, sellers begin to outnumber buyers, believing the asset is overvalued or due for a correction. This increase in selling pressure at the resistance level makes it difficult for the price to rise further. Traders often use resistance levels to make trading decisions. For instance, they might sell an asset when its price approaches a resistance level, anticipating that it will start to fall. Conversely, if an asset's price breaks through a resistance level, this could signal that the asset is moving into a new price range and the old resistance level may become a new support level. It's important to note that resistance levels are not exact numbers but rather zones or ranges where selling pressure is observed. The concept of resistance (and its counterpart, support) is fundamental in technical analysis and helps traders identify potential turning points in market trends.

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