Course Content
Introduction
The stock market is a marketplace where shares of publicly listed companies are bought and sold. It plays a central role in the modern economy, acting as a bridge between businesses that need capital and investors who have money to invest. The origins of the stock market trace back to the early 1600s, when the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. This allowed the company to raise money from the public to fund its trade ventures, in return for a share of the profits. Over time, this concept evolved, and today, stock markets exist all over the world, with major exchanges like the New York Stock Exchange (NYSE), NASDAQ, and London Stock Exchange facilitating trillions of dollars in trade. At its core, the stock market enables businesses to grow. By offering shares to the public through a process called an Initial Public Offering (IPO), companies can raise large amounts of money to expand operations, invest in research, or develop new products—without having to rely solely on banks or private lenders. In return, investors get the opportunity to share in the company’s success through rising share prices and dividends. Investing in the stock market can be a powerful way to build wealth over time. Wise investments in strong companies can generate solid returns, especially when held for the long term. Many individuals have grown their savings substantially by investing in companies that have thrived. However, it’s important to remember that the stock market carries risks. Prices can go up, but they can also go down—sometimes sharply. Economic downturns, company mismanagement, or shifts in the global market can all lead to losses. For beginners, it's essential to approach investing with caution, avoid chasing “get rich quick” schemes, and take the time to understand what you're investing in. In short, the stock market is a powerful tool for economic growth and personal financial development—but like all tools, it must be used wisely.
0/7
Introduction
Stock Markets Around The World
Listing On A Stock Market
How Stocks are Bought and Sold
Trade Date vs Settlement Date, What is T + 2?
What Is A Stock Market Index?
ETF’s and Index Funds
Fundamental Analysis
0/8
Fundamental Analysis Introduction
Understanding Revenue and Profit
Earnings Per Share and PE Ratio
Understanding the Balance Sheet
Understanding Cashflow
Dividends – How Investors Earn Income From Their Shares
What Causes Stock Prices To Rise And Fall
Understanding Market Capitalization
Technical Analysis
Along with Fundamental Analysis, Investors increasingly rely on Technical Analysis to decide whether to buy or sell a stock. Here we will explore the main techniques.
0/8
Introduction to Technical Analysis
How To Read A Price Chart – The Basics
Understanding Support and Resistance Levels
Identifying Trends and Drawing Trendlines
Understanding Moving Averages
Introduction to Momentum Indicators
Chart Patterns – Spotting Setups in the Market
Volume – The Power Behind a Price Movement
Investing Safely and Profitably
How do professionals invest safely and profitably? Some key concepts such as position sizing and stop losses.
0/8
How To Place Trades And Manage Risk
Using A Trailing Stop To Protect Profits and Limit Loss
Diversification and Portfolio Management
Taking Profits
Common Investor Mistakes And How To Avoid Them
A Quick Word On Taxes
Summary and Beginner’s Checklist
10 Must Read Books for Investors and Traders
Beginners guide to investing in the Stock Market

Understanding Support and Resistance Levels

 

Support and resistance are two simple but powerful concepts used to understand where a stock’s price tends to pause, reverse, or break out.

 

They act like invisible walls on a price chart — areas where buying or selling pressure tends to show up based on historical behaviour.

 

 

What Is Support?

 

Support is a price level where a stock tends to stop falling and may start to bounce back up.


It represents a zone of buying interest — where demand is strong enough to hold up the price.

 

Example:
If a stock keeps dropping to around $50 but never goes below it, that level becomes support.

 

Why It Happens:

  • Investors may see the stock as “cheap” at that level.

  • Traders expect a rebound and start buying.

  • Institutions may step in with large buy orders.

 

 

What Is Resistance?

 

Resistance is a price level where a stock tends to stop rising and may start falling again.


It’s a zone of selling interest — where supply is strong enough to push the price back down.

 

Example:
If a stock struggles to move above $80 on multiple attempts, that level is seen as resistance.

 

Why It Happens:

  • Traders may lock in profits at that level.

  • Investors may believe the stock is getting expensive.

  • Past sellers who “got stuck” may want to exit.

 

 

Role Reversal – Support Becomes Resistance (and Vice Versa)

 

Once a support level is broken, it can become resistance — and the same is true in reverse.

 

Example:
If a stock falls below its support at $50, that same level may now block upward movement as investors who bought at $50 try to sell and break even.

 

 

How Traders Use Support and Resistance

 

  • Entry Points: Buy near support, sell near resistance.

  • Stop-Loss Placement: Set stops just below support (when buying) or above resistance (when shorting).

  • Breakout Trades: Buy when price breaks through resistance with strong volume, or short when it falls through support.

 

 

How to Identify Support and Resistance

 

  1. Look at past price behaviour: Where did the stock bounce or reverse?

  2. Use horizontal lines: Draw lines across major highs and lows.

  3. Round numbers: Stocks often react around whole numbers like $50, $100.

  4. Volume spikes: High volume at certain price levels often reinforces them as key zones.

  5. Moving Averages and Trendlines (covered soon) can also act as dynamic support/resistance.

 

 

Visual Example (Description):

 

Imagine a stock chart where the price bounces off $45 multiple times — that’s support.


It rises to $60 several times but can’t break through — that’s resistance.


Eventually, it breaks above $60 with strong volume — that’s called a breakout.

 

 

Summary

 

  • Support = A floor that price tends to bounce off

  • Resistance = A ceiling that price tends to struggle with

  • These levels help traders identify entry, exit, and stop-loss points

  • They are psychological zones, not precise lines — think of them as areas, not exact prices

 

Support and resistance form the backbone of many trading strategies — and they become even more powerful when combined with other tools like volume, moving averages, and chart patterns.

 

Previous
Next

Stock Market Course