What support and resistance are

Support is a price zone where buying tends to appear strongly enough to halt a decline; resistance is a price zone where selling tends to appear strongly enough to halt an advance. Simply put, these are zones where price has repeatedly stopped or reversed, so they may react again when revisited.

Why it matters

These are natural decision zones: where to consider entries, place stops, and set targets. Many other techniques come down to how price behaves around these zones.

How to recognize it

Support and resistance often align with prior highs and lows, psychological round numbers, or levels where price has reacted several times. An important feature is that when price breaks a level, its role often flips: broken resistance can become new support, and vice versa. Treat them as zones, not a level exact to the unit.

How to apply it

Use support and resistance to plan scenarios in advance: if price returns to support and shows signs of stopping its fall, consider a buy scenario with a stop below the zone; if price rises to resistance and shows signs of stalling, consider the opposite. Combine with the trend for more reliability rather than using them alone.

A concrete example

A stock repeatedly hits 50 and bounces down, showing 50 as resistance. When price finally clears 50 and rises, the 50 level becomes support when price returns to test it. A trader uses this to place a stop just below the zone that flipped from resistance to support.

Common mistakes

  • Treating support and resistance as an exact price rather than a zone, then getting wicked out at the edge.
  • Believing a level will always hold, forgetting any level can break.
  • Placing a stop right at an obvious level where many others cluster, easily swept.
  • Ignoring trend context when judging a zone.

FAQ

  • Why does price react at these levels? Because many people see them and act around them, creating concentrated buying and selling. It's partly a self-fulfilling psychological effect.
  • What if a level breaks? Its role often flips: broken resistance can become support, broken support can become resistance.
  • How precisely should I draw them? Treat them as zones with thickness, not thin lines; price usually reacts around a zone rather than at an exact point.

Checklist

  • ☐ Is this zone confirmed by multiple past reactions?
  • ☐ Am I treating it as a zone or as an over-precise level?
  • ☐ Does my scenario account for the zone breaking?
  • ☐ Is my stop at an obvious level that's easily swept?