Support and Resistance

What support and resistance means

These levels form where price has reacted before, so traders watch them for the next reaction. The more times a level holds, the more attention it draws, but the more often it is tested the more likely it eventually breaks. A broken resistance often flips into support, and a broken support into resistance.

How support and resistance is traded

• →Look for a reaction, such as a bounce or a rejection, as price approaches a known level.
• →Trade the break with confirmation, or trade the bounce off the level with a tight stop beyond it.
• →Watch old resistance become new support after a breakout, and the reverse after a breakdown.
• →Treat levels as zones, not exact prices, since reactions cluster around an area.

Common mistakes

• ✕Treating a level as an exact line instead of a zone, and getting stopped on a small overshoot.
• ✕Trading every touch without confirmation in a strong trend that runs straight through.

Watch: support and resistance explained