Resistance points are critical to car buyers. Say you budget to spend £10,000. You will happily buy from a dealer for £9,999, but not £10,200 without a big push. The same rule applies to stockmarkets.
Shares, for example, can often trade in channels, rarely breaking below or above consistent minimum and maximum prices. Those are a stock’s resistance points.
Chartists spend hours trying to work out where these are and how strong they are – how often a stock retraces to a previous one is a good starting point. They also try to work out when a resistance point will be broken, sending the share much higher or lower.
The trick is to try and position yourself ahead of the ‘break out’. Fibonacci’s golden mean is one way to try and locate resistance points, but there are plenty of others too.