A support level in trading is a price point where buying pressure historically prevents further downward movement, acting as a floor that price bounces off repeatedly. Support forms at previous lows, moving averages, psychologically significant numbers, or zones where large buy orders accumulate. When price approaches support, traders watch for either a bounce (reversal up) or breakdown (price crashes through). Strong support holds multiple times and validates bullish sentiment, but when major support breaks, it triggers cascading sell-offs as stop-loss orders are hit and panic selling accelerates.
Example:
Bitcoin found support at $25,000 four times throughout 2023, bouncing each time buyers stepped in aggressively. This established $25,000 as a critical support level where traders expected buying pressure. When Bitcoin finally broke below $25,000 in a flash crash to $24,200, stop-losses triggered, panic selling erupted, and Bitcoin quickly fell to $22,500 before finding the next support. Support breaks often lead to rapid 10-20% additional drops as the previous floor becomes psychological resistance.