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What is Support in stock market ?

Support in the stock market refers to a price level at which a security tends to find buying interest and experiences a halt in its downward trend. It acts as a floor for the price, preventing it from declining further. Support levels are significant technical indicators used by traders and investors to make decisions about buying or selling securities.

How to identify support in the stock market?

Support levels are identified on stock charts where prices have previously found buying interest and reversed their downward movement. These levels are often represented by horizontal lines on a chart, connecting multiple price points where the stock bounced back from lower levels.

What are the types of support?

There are two main types of support: 

  1. Historical support: These are price levels where the stock has previously found buying interest and reversed its downward trend.
  2. Psychological Support: These are round-number price levels, such as $50 or $100, where investors may psychologically perceive value and buy the stock.

Why support matters in stock trading

Support levels are essential in stock trading as they provide traders with potential entry points for buying stocks at lower prices. They also help traders identify areas of potential price reversals and manage risk by placing stop-loss orders below support levels.

What happens when support levels break

If support levels are breached, it may indicate a weakening of buying interest and a potential trend reversal. When support levels break, they can turn into resistance levels, where the stock may struggle to rise above that price level. Traders often interpret the breaking of support levels as a bearish signal and may adjust their trading strategies accordingly.

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