Support and Resistance

Finding levels

• Swing highs and lows on the daily and weekly charts: the more times a level has turned price, the more it matters.
• Round numbers: 1.1000, 150.00, 2,000 on gold attract orders.
• Previous day, week and month highs and lows.
• Levels where a large candle began, which often mark where a decision was made.

Zones, not lines

Price rarely turns at the exact pip it turned at last time. A level is a band a few pips or a fraction of the daily range wide. Draw it as a rectangle if the platform allows, place stops beyond the zone rather than at its edge, and expect price to overshoot into it before turning.

Role reversal

When resistance breaks, it tends to become support on the next pullback, because those who sold there are now buying to cover and those who missed the breakout are buying the retest. The reverse holds for support that breaks. This is the retest from the breakout lesson, and it is one of the most reliable behaviours on a chart.

Using levels

Entries near a level with a stop beyond it give a small stop distance and a clear invalidation. Targets at the next level give a defined reward. A trade with no level near the entry has no anchor, and a trade whose stop sits at a level rather than beyond it is inviting a false break to take it out.

Key takeaways

• Levels come from swing points, round numbers and period extremes.
• They are zones; stops go beyond them.
• Broken resistance becomes support and vice versa.
• Anchor entries, stops and targets to levels.