In technical analysis, support and resistance are points where price would reverse its trend. Traders usually buy at support and sell at resistance. It identifies price level where price react by reversing or slowdown, previous price behavior at these levels is a clue for future price behavior and is useful for prediction. In order to understand more deeply about support and resistance, we will give an example.
From the graph, red arrow shows resistance level while green arrow is support level. You can see that there is a pattern of price trend in this graph where price will not tend to raise above $8,400. Traders start to sell at this point and cause the price to drop. Similarly, the prices are not going down further than $7,000, as traders will begin to buy the coin and cause the price to rise again. Therefore, traders record the past price behavior and react to situation to predict future market movement.
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