Support and resistance are the most fundamental concepts in technical analysis. They represent price levels where buying or selling pressure is strong enough to bounce or block price.
Support: level below current price where demand is strong enough to prevent further declines. Buyers see a "good price" and step in heavily.
Resistance: level above current price where supply is strong enough to prevent further rises. Sellers see "too expensive" and offload positions.
How to identify them:
- Historical highs / lows: a level touched multiple times that held
- Round numbers: 1.10 on EUR/USD, $100,000 on Bitcoin (psychological effect)
- Old supports turned resistance (and vice versa) after breakouts
- Moving averages 50, 100, 200: often act as dynamic support/resistance
- Fibonacci levels: 38.2%, 50%, 61.8% retracements
Entry strategies:
- Buy at support: long entry when price hits strong support, stop below support, TP at next resistance
- Resistance breakout: long entry on confirmed break (close above + volume), stop below resistance, TP at next level
- Pull-back: wait for retest of old resistance turned support before entering (safer than raw breakout)
The more a level is tested without breaking, the stronger it is psychologically. But paradoxically, the more it's tested, the more violent the final break tends to be — accumulated orders above trigger cascade.