A resistance level refers to a price point where an asset tends to struggle to rise above. When the price approaches this level, selling pressure often increases, causing the price to drop or consolidate. This happens because many traders believe the asset is overvalued at that point, leading them to sell.Resistance levels can be identified through historical price data, where the asset has previously faced difficulty in moving higher. These levels can act like a psychological barrier, as traders remember past reactions at these points and adjust their strategies accordingly.Breaking through a resistance level often indicates strong momentum, attracting more buyers and potentially leading to a significant price increase. Once a resistance level is surpassed, it can become a new support level, where buying interest may increase if the price pulls back. Understanding these levels helps traders make informed decisions about entry and exit points.