Resistance is a level in which the price of an asset fails to break through to a higher price due to strong selling pressure. In simpler terms, a resistance level acts as a temporary “ceiling,” preventing prices to rise further. Traders usually treat resistance as a level that can only be surpassed with significant buying pressure.
In technical analysis, resistance lines are drawn based on the previous highs of an asset. Measuring resistance levels is especially useful when trying to predict points of price reversal.
A resistance level, when surpassed, usually become a support level that acts as a ‘floor’ that holds the price. Good trading opportunities usually arise when resistance or support levels are broken.