Zone Of Support

DEFINITION of 'Zone Of Support'

A price zone in which a stock finds support and begins to trade upward once again. In technical analysis, support occurs not at a finite point, but in a zone. The "density" of the zone of support (how far the price can move down 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 support, the higher the point at which actual support will most likely occur.

BREAKING DOWN 'Zone Of Support'

As the price of a security falls toward a zone of support, 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 raise the actual support point within the zone, the chance of the support zone being wiped out is also higher.

When trying to catch the bottom of a retracement, it is imperative that stop-loss orders be used.

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