Zone Of Resistance

AAA

DEFINITION of 'Zone Of Resistance'

A price zone in which a stock finds resistance and begins to trade downward. In technical analysis, that support occurs not at a finite point, but in a zone. The "density" of the zone of resistance (how far up the price can move through it), depends on the volume of trading as the price approaches and enters the zone. The higher the volume of trading in the zone of resistance, the lower the point at which the actual resistance will most likely occur.

INVESTOPEDIA EXPLAINS 'Zone Of Resistance'

As the price of a security climbs toward a zone of resistance, it is a test: how far the price moves down through the zone will be an important indicator for future attempts to pass through it.

It is important to note that even though higher volume can lower the actual resistance point within the zone, the chance of the resistance zone being wiped out is also higher. When trying to pick the top of a retracement, it is imperative that stop-loss orders be used.

RELATED TERMS
  1. Zone Of Support

    A price zone in which a stock finds support and begins to trade ...
  2. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  3. Resistance (Resistance Level)

    A chart point or range that caps an increase in the level of ...
  4. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  5. Retracement

    A temporary reversal in the direction of a stock's price that ...
  6. Reversal

    A change in the direction of a price trend. On a price chart, ...
Related Articles
  1. Fibonacci And The Golden Ratio
    Active Trading

    Fibonacci And The Golden Ratio

  2. Support And Resistance Basics
    Active Trading Fundamentals

    Support And Resistance Basics

  3. Trade On Support For The Best Exit Strategy
    Active Trading Fundamentals

    Trade On Support For The Best Exit Strategy

  4. Moving Average Explosions
    Forex Education

    Moving Average Explosions

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center