Support and resistance: how to find the levels that matter

Support is a price zone where falling prices have tended to stop because buyers stepped in. Resistance is a price zone where rising prices have tended to stall because sellers stepped in. They are not lines that price must obey. They are areas where the market has reacted before and may react again, which makes them the most useful places on a chart to plan an entry, a stop and a target.

If you are new to charts, read how to read candlestick charts first, because every level here is drawn from candle highs, lows and closes.

What is support and resistance?

Look at any chart for long enough and you will see price turn at the same areas again and again. A floor that catches several drops is support. A ceiling that caps several rallies is resistance. When price is between the two and keeps bouncing, the market is in a range. When it breaks out of one and keeps going, it is trending.

A level is only a record of where the market reacted in the past. It tells you where something might happen, not what will happen. Treat it as a place to watch, then let the candles there show who is winning this time.

Why do support and resistance levels form?

Levels form for two reasons that feed each other: memory and orders.

Market memory

Traders remember prices. Someone who bought at $60,000 and watched the price fall to $55,000 often wants to sell when price returns to $60,000, just to get out even. That cluster of break-even sellers creates resistance. Someone who missed a bounce from $55,000 often wants to buy if price comes back there. That cluster of second-chance buyers creates support.

Resting orders

Many traders place orders in advance at obvious prices: limit buys under the market, take-profit orders under recent highs, and stop orders just past recent lows and highs. Those orders sit in the order book and get filled when price arrives. A pile of buy orders slows a fall. A pile of sell orders slows a rally. A pile of stop orders can do the opposite: when price touches it, the stops trigger and push price further, which is why levels sometimes break with a sudden spike.

Because so many people watch the same prices, levels are partly self-fulfilling, and the most obvious ones attract the most false breaks.

How do you draw support and resistance zones?

Draw zones, not lines. Price rarely turns at exactly the same tick twice. Wicks overshoot, closes fall short, and a thin line will look broken when the level is doing its job.

1. Start on a bigger timeframe. Open the daily chart, then the 4-hour. Levels visible there carry more weight than ones you can only see on a 15-minute chart.
2. Find clear turning points. Mark swing lows where price fell and then rallied, and swing highs where it rose and then dropped. A swing low here means a candle whose low is below the 3 candles before and after it.
3. Look for clusters. When two or more turns sit at roughly the same price, you have a candidate level.
4. Set the edges. Draw the zone from the cluster of candle closes or bodies on one side to the wick extremes on the other. A good zone is usually somewhere between a quarter of an ATR and one ATR thick (ATR, average true range, is the typical size of a recent candle).
5. Keep it sparse. If your chart has twelve levels, none of them mean anything. Keep the few that price clearly respected and delete the rest.

Which support and resistance levels matter most?

Not all levels are equal. These make one worth more attention than another.

• Clean touches. Two or three clear reactions are better than one. Be careful past that: each test uses up some of the orders resting at the level, and a level hit five times in a week is often closer to breaking than holding.
• Timeframe. A level from the daily or weekly chart outranks one from the 15-minute chart. More traders see it and more money was traded there.
• Round numbers. Prices like $60,000 or $3,000 attract orders because people like round numbers. Expect reactions slightly before or slightly past them.
• The previous day's high and low. Many traders mark yesterday's range every morning, so these prices often act as short-term levels. The previous day sweep setup is built on them.
• Volume profile levels. A volume profile shows how much traded at each price. The POC (point of control) is the busiest price, and markets often lean on it. See POC reclaim and value area fade for setups that use it.

The best levels stack several of these. A daily swing low that also sits near a round number and yesterday's low is worth far more than any of the three alone.

How do strategies use support and resistance?

Almost every setup on this site starts with a level. What differs is what the trade expects price to do there.

• Range trading buys near support and sells near resistance while both hold. See range trading.
• Fading buys a quick, failed poke below support, betting the stops were absorbed. See range fade and SMC sweep and change of character.
• Breakout trading buys a close above resistance, betting the move continues. See breakout trading and Donchian breakout.
• Pattern confirmation waits for a reversal candle at a level. See bullish engulfing at a level.
• Pullbacks and dips buy weakness into support inside an uptrend. See buying the dip.

In every case the level also does the risk work: it tells you where the stop goes and where the first target sits. For stop placement in detail, see where to put a stop loss.

What happens when support or resistance breaks?

Real break or fakeout?

A fakeout, or false break, is when price pushes through a level and then quickly returns. Obvious levels hold obvious stop orders, which makes them easy to trigger. You cannot know in real time which break is real, but some signs help.

The rule that does most of the work is to wait for the close. A level is not broken until a candle has closed beyond it. Even then, a close back inside soon after means the break has failed, and a breakout trade should be closed.

Role reversal: old resistance becomes new support

When resistance breaks, it often becomes support. When support breaks, it often becomes resistance. This is called role reversal, or a flip.

The reason goes back to memory and orders. Traders who sold at resistance and watched price break higher are now wrong. Some will buy back if price returns to the level, adding demand there. Traders who missed the breakout see the retest as a second chance. Together they can turn the old ceiling into a new floor.

A retest that holds shows the level was respected from both sides. A retest that closes back below the old resistance is a warning that the breakout was weak.

Common mistakes

• Drawing thin lines. A line gets "broken" by every wick, which leads to panic exits and late entries when the zone was holding fine.
• Too many levels. With a level every few hundred dollars, price is always near one, so none of them help you decide anything.
• Drawing levels during a crash. Levels picked in the middle of a fast move tend to be wishful, so mark them while the market is calm.
• Stops exactly at the level. Stops just past an obvious low are where sweeps happen, so add a buffer beyond the whole zone.
• Treating a wick as a break. Entering a breakout on a wick that never closes beyond the level is how most fakeouts catch people.
• Ignoring the trend. Support in a downtrend tends to give way, so buying every touch against the trend bleeds the account slowly.

What to check

1. Can you see the level on a bigger timeframe? Check the 4-hour and daily charts. If the level only exists on a 15-minute chart, give it less weight and use a smaller size.
2. How many clean touches does it have? Two or three clear reactions are a good sign. Many recent tests that each bounce less suggest the orders there are running out.
3. Did you draw a zone? Mark the area from the closes to the wicks. Your stop belongs past the far edge of that zone plus a small buffer, not in the middle of it.
4. Does anything else line up? Round numbers, yesterday's high or low, and the POC all add weight. A level with nothing else nearby is weaker.
5. Is there room to the next level? Measure the distance to the next zone in the direction of the trade. If it is less than about 1.5 times your risk, the trade does not pay enough.
6. Has a candle closed beyond it? Do not treat a level as broken, or as held, until the candle closes. Wicks lie more often than closes.
7. What is your size? Work it out from the stop: (account × risk %) ÷ (entry − stop). See how much to risk per trade for the details.