Support & Resistance
Price levels where buying interest (support) or selling pressure (resistance) has historically been strong.
Plain English Explanation
Support and resistance are the floor and ceiling of price. They're levels where price has historically struggled to move through.
**Support (the floor):**
- Price tends to stop falling and bounce
- Represents a level where buyers step in
- More tests = stronger support (until it breaks)
**Resistance (the ceiling):**
- Price tends to stop rising and reverse
- Represents a level where sellers appear
- More tests = stronger resistance (until it breaks)
**The role reversal rule:**
- Once resistance breaks, it often becomes support
- Once support breaks, it often becomes resistance
**Why they work:** These levels represent memory. Traders remember where they bought/sold, where they got stopped out, where they wish they had acted. This creates collective behavior at these prices.
How It Works (Technical)
Support and resistance form at price levels where supply and demand are imbalanced. Previous highs, lows, round numbers, and areas of heavy trading volume all create these levels. The more times a level is tested, the more significant it becomes.
When It Works Best
- All markets and timeframes
- Range-bound markets (fade the levels)
- Trending markets (buy support, sell resistance)
- Setting stop losses and profit targets
- Identifying high-probability trade zones
When It Fails
- During major news events
- When levels are too subjective
- In extremely volatile conditions
- When everyone is watching the same level (stops get hunted)
- If treated as exact lines instead of zones
Common Beginner Mistakes
- 1Treating S/R as exact prices instead of zones
- 2Drawing too many levels (focus on major ones)
- 3Not adjusting levels on higher timeframes
- 4Ignoring the trend (don't buy support in downtrend)
- 5Not waiting for confirmation at levels
Pro Tips
- Higher timeframe S/R levels are more powerful
- Round numbers often act as psychological S/R
- Look for confluence (Fib + S/R + MA)
- Watch volume at S/R for confirmation
- Broken S/R levels often see retests
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