Support is an area where buying has previously been strong enough to stop price falling. Resistance is an area where selling has previously stopped it rising. They are among the oldest ideas in chart analysis, and among the most misused.
Why zones, not lines
Price rarely turns at exactly the same number twice. It turns somewhere in an area. Drawing a thin line at one price makes every slightly-beyond move look like a break. Draw a band that covers the cluster of swing highs or lows, including their wicks.
How to find them
- Look at the higher timeframes first: those levels carry more weight.
- Mark areas where price turned sharply more than once.
- Mark areas where price consolidated before a big move.
- Ignore minor levels in the middle of nowhere.
Flips
A broken support often becomes resistance, and a broken resistance becomes support, because traders who were wrong at the level may close there and others reposition. It is a tendency, not a rule: levels also just fail.
More touches are not always better
A level that has been tested many times is more visible, but each test may also weaken it, and a large number of stops may collect on its far side. A level is not safe because it has held before.
Planning for failure
Whatever you call the area, decide in advance what you will do if price closes beyond it. If your stop sits just beyond the zone, that is where the idea is proven wrong.