Support and Resistance: The Secret Tool of Expert Traders

Trading is not about luck. If you understand Support and Resistance, you’re already halfway there because support and resistance levels are where the price tends to stop running and reverse — making them advantageous entry and exit(Action Zone) points. And that’s not all; they also help you identify where to take profits and where to cut losses.

Basic Knowledge: What are Support and Resistance?

Support (Support) is a price level where the price has dropped and then bounces back up or stops falling — like a wall holding the bottom.

Resistance (Resistance) is a price level where the price has risen and then stops or reverses downward — like a ceiling above.

Strong support and resistance levels are tested multiple times with massive trading volume. When they break, the previous level often turns into a support or resistance in the opposite direction — strong resistance becomes strong support, or vice versa.

Where do they come from: Economics vs. Psychology

Economics perspective: Price moves up and down due to supply and demand. At a certain price level, when demand equals supply, the price stops moving — this point is support or resistance.

Psychology perspective: All traders see this point as a shield — those who bought will buy more, those who sold will take profits, and those who haven’t entered see it as the last chance. This causes heavy trading volume and makes it hard to break through.

In an uptrend (Uptrend), prices are always above support, and in a downtrend (Downtrend), prices are always below resistance because the trend is your best friend.

5 Practical Methods to Find Support and Resistance

1. Trendlines (Trendline) - The most important

If the price is rising, draw a line through all the lows = support. If the price is falling, draw a line through all the highs = resistance.

This helps visualize the trend that may not be obvious to the naked eye.

2. Round Numbers (Round Number) - Psychological principle

Prices at $10, $100, $1,000 are loaded. Our minds see round numbers as shields — many traders wait to trade at these levels.

For example, when the price drops to $10 people feel “cheap enough”$100 and buy; when it rises to ###people feel “expensive”( and sell.

) 3. Moving Averages (Moving Average) - Visible cost basis

The 20-day, 50-day, 200-day lines are like the average cost of traders. In an uptrend, they act as support; in a downtrend, they act as resistance.

Works well in clear trending markets, not in sideways ###Sideways( markets.

) 4. Fibonacci ###Fibonacci( - Golden ratio

Sequences like 0, 1, 1, 2, 3, 5, 8, 13, 21, 34… with ratios 23.6%, 38.2%, 61.8%, 78.6% seem magical.

When the price bounces back, it often stops at these ratios. For example, a 38.2% retracement often indicates a temporary support.

) 5. Price Gaps ###Gap( - Silence and risk

Price gaps are periods with no trading, where the price jumps over a level — caused by big news, market open/close, or after-hours trading.

These gaps often serve as strong support or resistance. Traders see them as dangerous empty lands and hesitate to go down.

3 Trading Strategies Using Support and Resistance

) 1. Range Trading ###Range Trading( - Suitable when the trend is unclear

Price moves within a range. Buy at support, sell at resistance, and profit from the bounce.

) 2. Reversal Trading ###Reversal( - When the price hits a wall

Price hits resistance = sell; price hits support = buy.

This is the main way traders protect themselves — avoiding trading against the trend.

) 3. Breakout Trading (Breakout) - When the wall breaks

Price breaks resistance = it tends to continue upward, and the old resistance becomes new support.

Price breaks support = it tends to continue downward, and the old support becomes new resistance.

But false breakouts ###False Breakout( can deceive — price jumps over and then returns. Watch trading volume carefully; if it’s light, it might be a fake.

3 Things to Watch Out For

) 1. Never trade against the main trend ###Never Trade Against Trend###

“Trend is your friend.” In an uptrend — don’t sell at support; in a downtrend — don’t buy at resistance.

Selling at resistance in an uptrend is risky because the price might break through and continue higher.

( 2. Beware of old levels tested many times

The older the level, the more likely it is to break. The market environment changes; don’t cling rigidly to old lines.

) 3. Beware of false breakouts False Breakout

Price breaks through and then reverses — it deceives. It can cause profit loss or losses. Check volume; if it’s light, it might just be a “push-up” without real conviction.

Summary

Support and resistance are the ABCs of trading. Those who understand this well can develop effective trading systems because it tells you where to buy, where to sell, and where to cut losses.

But don’t forget — no system is 100% accurate. The key is Risk Management and Discipline. The more you practice, the clearer the picture becomes, helping you trade more wisely over time.