Content Summary: This article explains the basic concepts and applications of support and resistance levels in cryptocurrency technical analysis. Support level is the concentrated area of buying pressure when the price falls, and resistance level is the resistance area during price rises. These can be identified through five methods: previous high/low, round numbers, trend lines, moving averages, and high volume areas. Key tips include treating support/resistance as a range rather than a single point, requiring more than two confirmations, and combining with indicators like RSI/MACD for judgment. After a breakout, support and resistance will transform into each other, and investors should plan their trades in advance at key levels to avoid blind operations.
Hello everyone, I am Awen, a blogger focused on practical analysis in the cryptocurrency field.
Today we will discuss the most commonly used and important basic technical analysis in the cryptocurrency market—support and resistance levels.
They are the core tools for judging whether cryptocurrency prices will rebound or fall. Mastering them will help you chase less high and cut losses less, and capture the real market trends more.
I. What are support and resistance levels?
📌 Support Level (Support)
Support level is a position where buying pressure increases when the price falls to a certain level, making it difficult for the price to continue falling below that point. It can be understood as the 'floor' of the price.
📌 Resistance Level (Resistance)
Resistance level is a point where selling pressure increases when the price rises to a certain height, making it difficult to break through. It can be understood as the 'ceiling' of the price.
🧠 Remember this:
Support is the bottom protected by buying pressure, and resistance is the wall capped by selling pressure.
II. Why do these positions become support/resistance?
🔍 The principle is simple; it is actually a reproduction of market sentiment + historical behavior patterns.
There are many buyers near the support level because everyone feels the price is 'very cheap.'
There are many sellers near the resistance level because they feel 'it's almost at the top.'
Moreover, many people set stop-loss and take-profit orders near these key price levels, so when the price approaches these areas, a large amount of trading occurs, making it difficult for the price to break through.
III. How to find support and resistance levels?
Next, I will talk about five common methods that teach you to identify support and resistance at a glance!
✅ Method 1: Previous High/Low Method (most basic)
If the price has stopped falling/rising multiple times at a certain point in history, then this point will be the future support/resistance.
📌 Example:
Bitcoin reached a new high around 106,800 USD and stopped rising → this position is a clear resistance level.
✅ Method 2: Round Number Method
The market has a natural psychological expectation for 'round numbers,' such as BTC's 20,000, 30,000, 50,000, which often become support/resistance levels.
📌 Example:
Many people set take-profit and stop-loss at 30,000, leading to dense trading at this point, forming resistance/support.
✅ Method 3: Trend Line/Channel Line
Connect two or more high points or low points to draw trend lines.
When the trend line is ascending, the line is support; when the trend line is descending, the line is resistance.
✅ Method 4: Moving Average Method (e.g., MA20, MA50)
Moving averages are the moving average lines of prices; many people regard them as dynamic support/resistance levels.
📌 Example:
BTC repeatedly tested MA20 without breaking it during the rise → MA20 is dynamic support.
✅ Method 5: High Volume Area (Chip Concentration Area)
Areas with large trading volumes are usually regions where buyers and sellers are fiercely competing, making it easy to form important support/resistance.
IV. Transformation of Support and Resistance Levels
Many people don't know: support and resistance can transform into each other!
📌 Remember this formula:
Once resistance is broken, it becomes new support;
Once support is broken, it becomes new resistance.
Finding these points is not for 'divine prediction,' but to allow you to make planned trades at key positions, such as placing buy orders and setting stop-loss.
V. Tips for usage and precautions
📌 Tip 1: Support/resistance is not a point, but a range
Do not look too precisely at a specific price level; instead, look at the 'nearby area.'
📌 Tip 2: At least two rebounds/declines confirm it as effective
Judging from just one touch is unstable.
📌 Tip 3: Combine with other indicators for judgment
RSI entering oversold at support level = high probability rebound point
MACD golden cross + stabilization at support level = bullish signal
✅ Conclusion Summary
Support level is the bottom that the price is not easy to break, while resistance level is the top that is difficult to break through.
You can find them through previous high/low, trend lines, round numbers, moving averages, etc.
The most important thing is: plan your trades in advance at key points, do not chase highs or cut losses!
📣 If you want me to talk about 'how to set stop-loss' and 'how to find entry points with candlestick patterns' in the next issue, feel free to comment and let me know!
Follow me, I will teach you how to seek victory steadily in the cryptocurrency market and become a logical trader!
Thank you for your company. See you next time.