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Resistance: Resistance is a price level in the market where an asset, like a stock or index, tends to stop rising and might reverse its direction. It's a point at which traders believe the asset is overvalued, leading to increased selling activity. Identifying resistance levels helps traders make decisions about when to enter or exit trades.
Stop Loss: Stop loss is a risk management tool used to limit potential losses on a trade. It involves setting a specific price level at which a trade will automatically be closed if the market moves against the trader. This prevents losses from accumulating beyond a predetermined point and helps protect capital.
Breakout: A breakout occurs when the price of an asset moves beyond a well-established support or resistance level. It signals a potential change in market sentiment and often leads to significant price movements. Traders look for breakouts to identify opportunities for entering trades in the direction of the breakout, hoping to capitalize on strong trends.
Target: A target price is the level at which a trader plans to exit a trade to secure profits. It's based on technical analysis, market trends, and the trader's risk-reward preferences. Setting a target price helps traders lock in gains and avoid making emotional decisions, ensuring a disciplined approach to trading.
These concepts are fundamental to successful options trading, enabling traders to make informed decisions, manage risks, and identify opportunities in the market.
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