What is Support and Resistance?
Price levels where the market has historically reversed or stalled — support is where buyers have stepped in, resistance is where sellers have emerged.
Support and resistance are the two most fundamental concepts in technical analysis. They represent price levels where supply and demand have historically been concentrated.
Support:
A support level is a price where buying pressure has been strong enough to stop a decline and cause a reversal. Buyers see this price as attractive; sellers become reluctant.
Resistance:
A resistance level is a price where selling pressure has been strong enough to stop a rally and cause a reversal. Sellers see this price as a good exit; buyers become cautious.
How they form:
Support becoming resistance (and vice versa):
Once a support level is broken, it often becomes resistance. Once resistance is broken, it often becomes support. This is called "role reversal."
Using S/R for trade entries:
Swing traders often enter:
The R:R is maximised by entering close to these levels and targeting the next significant level.
Limitations:
Support and resistance are not precise price levels — they are zones. Prices often wick slightly through a level before reversing. Place stops with some buffer beyond the level, not right at it.