What is Support and Resistance?
Support is a price level where buying pressure overcomes selling pressure, causing price to bounce up. Resistance is where selling pressure overcomes buying pressure, causing price to reject down.
🟢 Support
- Price level where buyers step in
- Demand exceeds supply
- Price tends to bounce UP
- Look for buying opportunities
🔴 Resistance
- Price level where sellers step in
- Supply exceeds demand
- Price tends to reject DOWN
- Look for selling opportunities
Why S/R Works
Support and resistance levels are areas of memory. Traders remember where they bought or sold before. When price returns to these levels, the same psychology repeats - creating predictable reactions.
How to Identify Support and Resistance
Types of S/R Levels
1. Swing Highs & Lows
The most obvious levels. Previous turning points where price reversed direction.
How to find: Look for "V" shapes (swing lows) and "Λ" shapes (swing highs)
2. Psychological Levels
Round numbers like 1.1000, 1.1500, 150.00. Humans gravitate to round numbers for orders.
Big rounds: x.0000 (major), x.x500 (medium), x.xx00 (minor)
3. Historical Levels
Levels from the past that caused significant reactions - even months or years ago.
Pro tip: Check weekly and monthly charts for major historical levels
4. Dynamic Levels
Moving averages, trend lines, and Fibonacci levels that move with price.
Common: 20, 50, 200 EMA often act as dynamic S/R
Step-by-Step: Finding Levels
Start with higher timeframe (Daily/Weekly) to find major levels first
Identify clear turning points where price reversed
The more times price reacted at a level, the stronger it is
Mark major psychological levels (00, 50 levels)
Only mark the most significant levels - less is more
⚠️ Common Mistake
Don't draw a level at every swing point. Your chart will become a mess. Focus on levels where price has reacted multiple times or reacted strongly.
Zones vs Lines
Here's a truth that will improve your trading immediately: support and resistance are ZONES, not exact lines.
Think in Zones
Price rarely reverses at the exact pixel. It reverses in an area. A support "level" at 1.0800 might see bounces at 1.0795, 1.0803, 1.0798. That's all the same zone.
❌ Trading Lines
- Expects exact touch
- Gets stopped out by wicks
- Misses good entries
- Frustrating, unrealistic
✅ Trading Zones
- Allows for flexibility
- Accommodates market noise
- More entry opportunities
- Higher success rate
How Wide Should Zones Be?
| Timeframe | Typical Zone Width | Example (EUR/USD) |
|---|---|---|
| Monthly/Weekly | 50-100+ pips | 1.0800 - 1.0900 |
| Daily | 20-50 pips | 1.0850 - 1.0880 |
| H4 | 10-25 pips | 1.0860 - 1.0875 |
| H1 | 5-15 pips | 1.0865 - 1.0875 |
The Role Reversal Principle
One of the most powerful concepts in technical analysis: broken support becomes resistance, and broken resistance becomes support.
Support → Resistance
1. Price bounces off support multiple times
2. Price eventually breaks below support
3. Price pulls back up to test the broken level
4. Old support now acts as resistance → SELL
Resistance → Support
1. Price rejects from resistance multiple times
2. Price eventually breaks above resistance
3. Price pulls back down to test the broken level
4. Old resistance now acts as support → BUY
Why This Happens
Traders who missed the breakout want a second chance. When price returns to the broken level, they enter - creating the reaction in the new direction.
📈 Break and Retest Strategy
Measuring Level Strength
Not all S/R levels are equal. Some hold repeatedly, others break easily. Here's how to gauge strength.
Strength Factors
Number of Touches
More touches = stronger level. Each touch confirms its significance.
Timeframe
Higher timeframe levels are more significant.
Recency
Recent levels are more relevant than ancient ones.
Reaction Strength
How strongly did price react? Big moves from a level = significant.
Trading Support and Resistance
Two Main Approaches
1. Bounce Trading (Mean Reversion)
Trade the reaction at S/R - expect price to reverse
- Buy at support
- Sell at resistance
- Works best in ranges
- Tight stops beyond the zone
Risk: Getting run over if level breaks
2. Breakout Trading (Trend Following)
Trade the break of S/R - expect continuation
- Buy break above resistance
- Sell break below support
- Works best in trends
- Wait for retest for better R:R
Risk: False breakouts (fakeouts)
Bounce Trade Setup
📈 Buying at Support
💡 Confluence is Key
The best S/R trades have multiple factors aligned:
- S/R zone + trend line
- S/R zone + Fibonacci level
- S/R zone + moving average
- S/R zone + RSI oversold/overbought
Key Takeaways
Support is where buyers defend, resistance is where sellers defend.
Think in ZONES, not lines - give price room to work.
Broken support becomes resistance (and vice versa) - the role reversal principle.
More touches = stronger level, higher timeframe = more significant.
Always wait for confirmation before entering at S/R.