Learn Algorithmic Trading

Support and resistance indicators

In the first chapter, we explained the principle of the evolution of prices based on supply and demand. The price decreases when there is an increase in supply, and the price increases when demand rises. When there is a fall in price, we expect the price fall to pause due to a concentration of demands. This virtual limit will be referred to as a support line. Since the price becomes lower, it is more likely to find buyers. Inversely, when the price starts rising, we expect a pause in this increase due to a concentration of supplies. This is referred to as the resistance line. It is based on the same principle, showing that a high price leads sellers to sell. This exploits the market psychology of investors ...