Lesson 5 of 20 · 10 min
Support and Resistance
Step 1
What it is
Support is an area where falling price has stopped before. Resistance is an area where rising price has stopped before. They exist because many traders remember and act on the same prices.
Treat them as zones, not exact lines, and remember they break all the time. A level is a place to pay attention, not a promise.
Traders use them because they offer logical places to plan an entry, a stop and a target.
Step 2
See it on a chart
A zone that has held twice, with price returning a third time.
Illustrative chart with made-up prices and tick volume, built for teaching. It is not real market data and not a trade idea.
Step 3
The exact rules
What must be true before entry
- At least two earlier reactions in the zone.
- Price returning to the zone at a slower pace.
- A sign of reaction in the zone.
What volume should show
Where to enter
Where the hard stop goes
Where the target goes
What invalidates the idea
- A close beyond the zone.
- Each bounce is smaller than the one before.
When not to take it
- The level only looks important because you drew it after the fact.
- The nearest swing is too close for 3:1.
- Major news is due soon, or you would be trading outside your planned hours.
- You have just taken a loss and feel the need to win it back.
Step 4
Your turn: plan the trade
Price has returned to a zone that has already stopped it twice. Mark your plan.
This setup is a short. Look at the candles and the volume. Choose a line below, then tap the chart to place it. You can also drag its label or type a price.
Illustrative chart with made-up prices and tick volume, built for teaching. It is not real market data and not a trade idea.
Step 5
The trap: treating a line as a guarantee
If you believe a level must hold, you will find reasons to hold on when it breaks. Say it to yourself before you enter: this level can fail, and if it does, I am out.
Read about routineStep 6