Resistance

Resistance is a price area where an asset has tended to stop rising or turn back down in the past, because sellers showed up there in enough size to overwhelm buyers. It is not a single exact price so much as a zone, since the "level" is really a memory of where supply entered the market before.

It works because prices move on the balance between buyers and sellers. If a stock rallied to $52 three times over a month and fell back each time, traders start to expect the same thing on a fourth approach, and some of them place sell orders near $52 in advance. Those orders, plus people taking profit and short sellers initiating positions, can create real selling pressure right at that price, which is what makes the level "work" — partly it's self-fulfilling.

The nuance beginners miss is that resistance is not a wall that price cannot cross; it's a place where price has had trouble crossing before. Levels get tested, sometimes fail, sometimes hold, and once a resistance level is broken with conviction it often flips and starts acting as support (a similar level below current price where buyers have historically stepped in) on the next pullback. Treating resistance as a guarantee rather than a probability is a common and costly mistake.

Resistance is also easier to spot in hindsight than in real time. Different traders draw the line in slightly different places depending on which highs they use and what time frame they're looking at, so two people can disagree about exactly where resistance sits on the same chart.