What support and resistance mean
Look at any price chart and you will see that the price does not move in a straight line. It rises, stops, falls, stops and rises again. The places where it stopped before are remembered by traders. If price fell to a certain area several times and then bounced, that area is called support. If price rose to an area several times and then fell back, that area is called resistance.
Why would this happen? One explanation is that many traders place orders around the same obvious areas: buyers who missed an earlier rise may want to buy near the old low, sellers who got trapped may want to exit at the old high, and traders place stop-loss orders just beyond. Whatever the reason, the levels are widely watched, which is what makes them useful for planning. They are not laws of nature, and price is free to ignore them.
Levels are zones, not single lines
Beginners draw a razor-thin line at one price and are annoyed when price goes a few pips through it. Treat a level as a zone with some thickness. A practical way is to mark the area from the highest wick to the highest candle body of the turning points, and use that band. On a daily chart the zone may be dozens of pips wide for a major pair, and on a five-minute chart it is much narrower.
Wicks matter here. Candles with long wicks into a level show that price tried to break and was rejected, which is useful information. For reading wicks and bodies, see candlestick patterns for beginners.
How to draw support and resistance, step by step
- Start on a higher timeframe such as the daily or four-hour chart. Higher timeframes give stronger and cleaner levels.
- Zoom out so that you see months of price history, not just a few days.
- Find obvious turning points: clear swing highs and swing lows where price reversed with a strong move.
- Mark areas where price turned more than once. Two or three touches make a level more meaningful.
- Draw a horizontal band, not a single line, covering the wicks and bodies near the turn.
- Remove levels that are too close together or that you can hardly see. A chart with twenty lines tells you nothing.
- Move to a lower timeframe such as one hour for entries, keeping the higher timeframe levels on the chart.
Round numbers such as 1.1000 on a currency pair or 2,000 on gold often act as levels because humans like them. This is an observation, not a rule. Our guides to EUR/USD and the major pairs and gold trading include examples of how those markets are discussed in terms of levels.
Breakouts, retests and role reversal
When price moves through a level, traders call it a breakout. After a real break, an old resistance often becomes new support, and an old support becomes new resistance. This is called role reversal. A common pattern is: price breaks a resistance level, comes back to test it from above and, if it holds, moves up again. The return is called a retest.
Not every break is real. A false breakout happens when price pokes through a level, attracts new buyers or sellers and then returns inside the range. Breakouts at news events are often unstable, because spreads widen and prices jump. To reduce this problem, many traders wait for a candle to close beyond the level and sometimes wait for the retest. Waiting also means a worse price and sometimes a missed trade, which is a normal cost of being careful.
Using levels in a trade plan: an example with made-up numbers
Imagine a currency pair has turned up from the zone around 1.0800 three times in recent months. Price comes back to that zone and prints a candle with a long lower wick, and the next candle closes higher. Your plan says you may buy after a confirmation candle, with the stop-loss below the zone, and a target at the next resistance level.
| Item | Example (illustration only) |
|---|---|
| Entry | 1.0820 after confirmation |
| Stop-loss | 1.0780, below the zone (40 pips) |
| Target | 1.0900, the next resistance (80 pips) |
| Reward to risk | 2 to 1 |
| Risk | 1 percent of the account |
With a 1,000 account and a risk of 10, the pip value must be 0.25 for the 40-pip stop. A win would bring about 20, and a loss costs about 10, before spread and swap. Notice that the level did not guarantee anything: it only gave a logical place for the stop and a target. Position sizing is explained in lots, pips and leverage and risk management for beginners.
What makes a level stronger or weaker
- Timeframe. Levels on daily and weekly charts matter more than those on five-minute charts.
- Number of touches. More touches usually mean more attention, but each touch also uses up the orders waiting there, so a level touched many times can finally break.
- Speed of the move away. A sharp move away from a level suggests strong interest.
- Recency. Recent levels are watched more than very old ones.
- Confluence. A level that coincides with a round number, a trendline or a previous high is more watched.
None of these properties turn a level into a certainty. Think in terms of probabilities and always know where you are wrong.
Levels, trendlines and ranges
Horizontal levels are the simplest tool, but price also respects sloping boundaries in trends. A rising trendline connects higher lows, and a falling trendline connects lower highs. These lines are even more subjective than horizontal levels, so keep them simple: use two clear touches, wait for a third and discard the line when price closes clearly through it.
When price moves sideways between a support zone and a resistance zone, traders call it a range. Inside a range, one approach is to look for reversals near the edges with the stop-loss outside the range. Another approach is to wait for a breakout. A range that has lasted a long time can produce a strong move when it ends, but the direction is not known in advance. Because of this, do not assume that the breakout will follow the previous trend; let price show you with a close beyond the range.
The width of the range also tells you whether a trade is worth taking after costs. If the whole range is only a few times larger than the spread, the cost takes a large share of any possible profit.
Mistakes beginners make with levels
- Drawing too many lines and then finding a reason for any trade.
- Using exact lines instead of zones, and putting the stop-loss exactly on the line where it is easily hit.
- Buying at resistance or selling at support without a plan for a breakout.
- Ignoring spread and news. Around news, price moves through levels with large jumps. Read spread, commission and swap to understand the costs.
- Holding after the level breaks. If your reason for the trade is gone, the plan says exit.
- Trusting online "secret levels". Sellers of signals who send levels with promised accuracy are a classic scam sign; see our scam guide.
How to practise
Take a chart in your trading platform (see the MT4 and MT5 guide if you need help installing it), scroll back several months and mark the levels as you would today. Then scroll forward and see what happened, without trading. Repeat on three or four pairs. After that, add rules about levels to your trading plan and test them on a demo account with a journal. Only a long record of results can tell you whether your way of drawing levels adds value after costs.
Chart the levels on an Exness demo
Risk warning
Forex and CFDs are complex products with a high risk of losing money quickly because of leverage. Many retail clients lose money, and support and resistance levels often fail. Trade only with money you can afford to lose entirely. You must be 18 or older. Auron FX is an independent guide, not a broker, and this article is education, not personal investment advice.