Resistance

Definition:

A historically significant price level that price action has had a difficult time trading above.

Background:

If price action rises and approaches a confirmed resistance level, a "re-test" of Resistance occurs and it can be either confirmed again or broken.

A test at Resistance is confirmed if a bearish change in market sentiment occurs at the resistance level.

Resistance is broken when the bullish market sentiment does not change at the resistance level and price action continues up through the resistance level.

Practical Use:

Traders often use Resistance levels as potential areas to "sell short" into or regions to simply avoid buying into. This can be very helpful in the "timing" of entering or exiting trades.