What Is Resistance?
Resistance is a price level where sufficient selling pressure exists to halt upward price movement and potentially reverse it. Think of it as a ceiling — price approaches, sellers step in, and price retreats. Resistance forms at previous swing highs, round numbers, moving averages, and areas of historical price congestion.
How Resistance Works
When price approaches a resistance level, sellers who bought lower take profits, short sellers enter new positions, and buyers become cautious. This concentration of sell orders creates a barrier. The more times a resistance level is tested, the more significant it becomes — but each test also weakens it as sell orders get absorbed.
Why It Matters for Traders
Resistance levels are primary decision points. Traders sell or short at resistance with stops above. When resistance breaks, it often becomes support (a "flip"). The reliability of resistance increases with higher timeframes and more touches. In crypto, resistance levels where large amounts of open interest are concentrated often coincide with liquidation zones, making the eventual break explosive.