Support and Resistance
Support and Resistance are the Fundamentals
One of the primary and fundamental principles of trading and market structure.
Support and resistance are invisible lines (or zones) in the market where price has historically responded and reacted. They can also be called areas of structure or key levels.
Why do they work? Because traders remember these levels. When price returns to a level where it previously reversed, traders expect the same reaction - and their collective orders make it happen. It's a self-fulfilling prophecy built on market memory.
Support
Support is like a phantom floor - a level where price struggles to fall below.
Why it works: At support, buyers step in. They see value at this price, or they remember that price bounced here before and expect it to bounce again. Demand exceeds supply.
How to trade it: You buy from support. Wait for price to approach the level, watch for signs of rejection (wicks, reversal candles), then enter long.
Resistance
Resistance is like a phantom ceiling - a level where price struggles to rise above.
Why it works: At resistance, sellers step in. They see price as overvalued, or they remember that price reversed here before. Supply exceeds demand.
How to trade it: You sell from resistance. Wait for price to approach the level, watch for signs of rejection, then enter short.
How to Identify Support and Resistance
Support and resistance are defined by multiple touches and rejections by price. Not every swing high or low is significant - you need evidence that the market respects the level.
The rule of touches:
- 2 touches: Start paying attention. The level might be significant.
- 3 touches: This is usually the strongest confirmation. The level has proven itself.
- 4+ touches: Be cautious. Each touch weakens the level. The more times a level is tested, the more likely it eventually breaks.
What you're looking for:
- Price approaches the level and reverses sharply (shows rejection)
- Multiple candles "tap" the level without breaking through
- Wicks that spike through but close back above/below (for support/resistance)
Key concept: Look for confluence - multiple reasons to believe the level matters. Does it line up with a previous swing high/low? A round number? A moving average? The more confluence, the stronger the level.
Types of Support and Resistance
Horizontal Levels
The most basic and often strongest form. A flat line where price has reversed multiple times. Easy to spot, easy to trade.
Trendlines
Diagonal support/resistance created by connecting swing lows (in an uptrend) or swing highs (in a downtrend). These act as dynamic levels that move with the trend.
Round Numbers (Psychological Levels)
Price levels ending in 00 or 50 (like 1.3000, 150.00, $50,000). Traders place orders at these "nice" numbers, creating artificial support/resistance.
Previous Day/Week/Month High and Low
Institutional traders and algorithms watch these levels. The high and low of the previous session often act as key levels for the current session.
Pivot points are one popular way of turning the previous session's high, low and close into reference levels. Enter a previous high, low and close to see them:
Try it · Pivot Points
From the period before the one being traded: usually yesterday for a daily pivot.
The traditional method: the average of the high, low and close, with levels built from the previous range.
Pivot point
1.10167
From a previous range of 1.09000 to 1.11000 that closed at 1.10500, the central reference is 1.10167. Levels above it are read as resistance and levels below as support.
| Level | Price | What it is |
|---|---|---|
| R3 | 1.13333 | Third resistance: a price above the pivot where sellers may show up. |
| R2 | 1.12167 | Second resistance: a price above the pivot where sellers may show up. |
| R1 | 1.11333 | First resistance: a price above the pivot where sellers may show up. |
| P | 1.10167 | The central reference: the previous period’s average. Price above it is often read as stronger, below it as weaker. |
| S1 | 1.09333 | First support: a price below the pivot where buyers may show up. |
| S2 | 1.08167 | Second support: a price below the pivot where buyers may show up. |
| S3 | 1.07333 | Third support: a price below the pivot where buyers may show up. |
Pivot points are reference levels calculated from past prices. Many traders watch them, which is the only reason price may react; they are not predictions and there is no guarantee price will stop at, or respect, any of them.
How was this calculated?
- Pivot = (High + Low + Close) ÷ 3 = (1.11000 + 1.09000 + 1.10500) ÷ 3 = 1.10167
- R1 = 2 × Pivot − Low = 1.11333; S1 = 2 × Pivot − High = 1.09333
- R2 = Pivot + (High − Low) = 1.12167; S2 = Pivot − (High − Low) = 1.08167
Fibonacci Levels
Fibonacci retracement and extension levels divide a swing into ratios such as 38.2%, 50% and 61.8%. Some traders watch them as places where a pullback may pause. They are reference levels that many traders happen to watch, not predictions:
Try it · Fibonacci Levels
61.8% retracement
1.10764
The swing from 1.10000 to 1.12000 is 0.02000 long. The levels below divide that move into the ratios some traders watch: pullbacks into these prices are where they look for a reaction.
| Level | Price |
|---|---|
| 0% | 1.12000 |
| 23.6% | 1.11528 |
| 38.2% | 1.11236 |
| 50% | 1.11000 |
| 61.8% | 1.10764 |
| 78.6% | 1.10428 |
| 100% | 1.10000 |
These are levels that some traders monitor. The tool does not imply that price will react to them: Fibonacci levels are a reference, not a prediction or a signal.
How was this calculated?
- Range = 1.12000 − 1.10000 = 0.02000
- Retracement level = High − Range × ratio. For 61.8%: 1.12000 − 0.02000 × 0.618 = 1.10764
- Extension level = Low + Range × ratio. For 161.8%: 1.10000 + 0.02000 × 1.618 = 1.13236
The Role Flip: Support Becomes Resistance (and Vice Versa)
When a support level breaks, it often becomes resistance. When resistance breaks, it often becomes support.
Why this happens: Traders bought at support expecting price to go up. When it breaks down instead, they're now in a losing position. Many of them want to exit at the price they bought (to avoid a loss). When price returns to that level, their sell orders create resistance.
How to trade it:
- Watch a key level break
- Wait for price to return and "retest" the broken level
- If the level now rejects price in the opposite direction, you have confirmation of the flip
- Enter in the direction of the break
This is one of the highest-probability setups in trading.
Important Notes
Higher Timeframe Levels are Stronger
Support and resistance on the daily or weekly chart will overpower levels on the 5-minute chart. Always know where the higher timeframe levels are - they're the ones that really matter.
Practical rule: Before trading, mark out the key levels on the daily and 4-hour charts. These are the levels you respect above all others.
Every Timeframe Has Its Own Levels
The 1-minute chart has support and resistance. So does the weekly chart. They're just operating on different scales. What looks like a major level on the 5-minute might be invisible on the daily.
Levels Are Temporary
Support and resistance don't last forever. They get broken and replaced constantly. A level that was key last week might be irrelevant today. The market moves on and creates new structure.
Don't get attached to old levels. Focus on the most recent and most tested levels.
Nested Levels
There can be smaller support and resistance levels within larger ones - just like trends within trends. A daily support zone might contain several 15-minute levels bouncing around inside it.
Strong Levels Get Wicked, Not Camped
Critical insight: Strong key levels are respected quickly - price touches and immediately rejects, leaving wicks.
If price sits at a level for a long time, "flirting" with it and grinding along it, that level is weakening. The longer price stays at a level without rejection, the more likely it will break.
Strong levels = sharp, fast rejection Weak levels = slow, grinding price action at the level
The Big Picture
The market is just bouncing around between the current relevant levels of structure. Even when price action seems random, it's usually playing out between support and resistance levels you might not have identified yet.
When confused, zoom out. Find the larger structure. Everything is just a smaller play within a larger game.
Quick Reference
| Concept | What to Look For | How to Trade |
|---|---|---|
| Support | Price bounces up from level multiple times | Buy when price approaches and shows rejection |
| Resistance | Price bounces down from level multiple times | Sell when price approaches and shows rejection |
| Role Flip | Broken level retested from opposite side | Trade the retest in direction of break |
| Strong Level | 2-3 touches, sharp rejections, wicks | High confidence trades |
| Weakening Level | 4+ touches, price grinding at level | Be cautious, may break soon |
Next: Candlesticks
You have the battleground; now let's look at the "hand-to-hand combat" happening at these levels.