Support becoming Resistance

Day trading really interests me and I love how a markets move for the day is largely pinned to fundamentals or news but then how there are also so many psychological factors playing a part. There are different players with different goals, e.g hedgers and speculators. Each player is unique and has access to an array of tools. Some use technical analysis which is the process of analysing past data to predict the next move. Technical analysis can be done in so many different ways which adds to the complexity of understanding how people interpret the data but this makes trading more interesting.

One concept I have learnt within technical analysis is support that becomes resistance. I never read why it happens, only that it does, so below is what I think happens. If the price bounces upwards of a particular point a few times, it is flagged as support or an area where people will step in and buy or at least have been doing so, i.e an area of demand! Then if it breaks this area and falls below, this area which was support now becomes resistance to any further upward move. It becomes resistance because there have been a lot of buyers at this level, even though some may have sold, there will surely be many people who bought in at this point still holding. If the market moves back towards this area it is natural that buyers within this area will not be able to resist cutting their losses. So there will naturally be selling pressure from some of these buyers. Therefore as long as new buyers don't flood in too strong, the price will find it hard to break this point, it is more likely that a bullish market will consolidate before breaking past. Additionally people will identify the resistance and this can add to it's strength.

It is now 1 week until I start training at a prop house. I really can't believe it and I am definitely ready to learn more and put everything into practice. I was looking through the list of things I have to learn and it seems I have covered them without trying to, there are just a few boring facts I need to know. I will try and get started on those tomorrow!