Support and Resistance Mastery
Support and resistance are the foundation of technical analysis. Mastering these concepts is essential for successful trading.
What is Support?
Support is a price level where buying interest is strong enough to prevent further price decline. Think of it as a floor.
Characteristics:
- Price bounces multiple times from this level
- Buyers outnumber sellers
- Often found at previous lows, round numbers, or moving averages
What is Resistance?
Resistance is a price level where selling interest is strong enough to prevent further price increase. Think of it as a ceiling.
Characteristics:
- Price fails to break above this level
- Sellers outnumber buyers
- Often found at previous highs, round numbers, or moving averages
How to Draw Support & Resistance
- Identify significant highs and lows on higher timeframes
- Use horizontal lines at areas with multiple touches
- Think in zones, not exact prices - allow some flexibility
- The more touches, the stronger the level
Role Reversal
When support breaks, it becomes resistance. When resistance breaks, it becomes support.
Trading Strategies
Bounce Trading
- Buy at support with stop below
- Sell at resistance with stop above
Breakout Trading
- Buy when price breaks above resistance
- Sell when price breaks below support
- Wait for retest for confirmation
Key Tips
- Use multiple timeframes
- Round numbers are psychological levels
- Fresh levels are stronger than heavily tested ones
- Combine with candlestick patterns for better entries