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Nifty Support and Resistance

Nifty Support and Resistance

Two concepts in technical analysis : support and resistance can be difficult to grasp for many especially those who are novices to trading in the Indian stock market. Simply put, these terms are used by traders to talk about price levels on charts which might act as an obstacle to preventing the price of an asset from being pushed in a certain direction. The price a security rarely moves above is known as resistance while the price it seldom goes below is called support.

What is Their Significance?

Support and resistance assume significance when it comes to market psychology as well as supply and demand. These are the levels where quite a few traders might be willing to buy or sell the stock on various platforms including the Nifty index. Some characteristics of support and resistance figures are outlined below:
  • They are useful in arriving at entry or exit prices.
  • Round numbers have been seen as important in support and resistance levels. Numbers such as 10, 20, 35, 50, 100 and 1000 are some examples. The increased selling and buying pressure at these numbers lends them psychological importance too.
  • They are an important component of trends because they help make trading decisions and pinpoint the moment the trend starts reversing.

Identifying Support and Resistance

Many indicators have been developed with the intention of identifying these barriers. But using them effectively takes some practice and experience. These two variables can be identified with the help of some methods used in technical analysis such as these:
  • Support and resistance can be easily determined with the help of moving averages
  • The Fibonacci retracement tool is another means of determining these
It doesn't matter which method is used so long as the interpretation is accurate.By using various methods to arrive at the support and resistance values of stocks, the returns from a short-term investing strategy can be drastically improved. They can be applied when trading in Nifty calls or Nifty options. Even foreign investors who trade on the SGX Nifty keep track of the support and resistance levels of their investments.
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