Web Trader MT5
Defend a level refers to when a large player, a central bank, a major institution, or sometimes a loose group of traders, recursively interferes with a particular price in order to prevent it from being violated. The level in question might be a round number with psychological significance, a key technical level that many people are watching, or an exchange rate that a government or central bank has decided it does not want to see broken.
The defense mechanism comprises either absorbing selling pressure (assuming that the level is support) or selling into buying pressure (assuming that the level is resistance).
It may be maintained for a long time, but it tends to cause tension: the more aggressively any level is defended, the bigger the move will be when it finally causes the level to be overrun.
Example: It took years for the Swiss National Bank to allow the EUR/CHF floor to drop to 1.20 before it began intervening whenever the franc seemed to be strengthening along those lines. It was maintained, until in January 2015, the SNB suddenly and without warning forfeited the defense.
The franc shot up almost 30 percent within a few minutes. A number of brokers became bankrupt. It was a good wake-up call that defended levels of work right until the point that they no longer do so.
