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. Active Trading

    Fibonacci And The Golden Ratio

    Discover how this amazing ratio, revealed in countless proportions throughout nature, applies to the financial markets.
  2. Active Trading Fundamentals

    Support And Resistance Basics

    Understanding the concept of Support and Resistance in trading can drastically improve your short-term investing strategy.
  3. Active Trading Fundamentals

    Trade On Support For The Best Exit Strategy

    Find your sound exit strategy based on support and resistance levels, while understanding the psychology behind them.
  4. Forex Education

    Moving Average Explosions

    Find out how you can profit from this short squeeze strategy.
  5. Active Trading Fundamentals

    Speed Resistance Lines

    Learn how to measure the uptrend and downtrend lines on a finance chart.
  6. Forex Education

    Using Double Tops And Double Bottoms In Currency Trading

    Find out how to apply the two most common price reversal patterns to your trading.
  7. Forex Education

    Forex: The Memory Of Price Strategy

    Hate getting stopped out right before the price reverses? This forex trading strategy may help.
  8. Active Trading Fundamentals

    Support And Resistance Reversals

    Discover how these influential levels can switch roles.
  9. Trading Strategies

    What is a common strategy traders implement when using the McClellan Oscillator?

    Read about the common trading signals that are generated by the McClellan oscillator, a market breadth indicator often applied to the New York Stock Exchange.
  10. Forex Strategies

    How do I implement a forex strategy when spotting a Mat Hold pattern?

    Read about how to implement a forex trading strategy after spotting a mat hold, considered one of the rarest and most reliable Japanese candlestick patterns.

You May Also Like

Hot Definitions
  1. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  2. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  3. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  4. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  6. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
Trading Center