What Are Support and Resistance?
Support is a price level where buying pressure is strong enough to stop the price from falling further. Think of it as a floor — each time price hits it, buyers step in. Resistance is the opposite — a ceiling where sellers overpower buyers and prevent the price from rising further.
Why Do These Levels Form?
Support and resistance form because of human psychology and order flow. Traders remember key price levels. When a price that previously acted as resistance is broken, it often becomes new support — this is called a role reversal.
How to Identify Support and Resistance
Previous highs and lows: Look at the chart and identify areas where price has previously reversed. These levels are marked in the market's memory.
Round numbers: Levels like $50,000 on Bitcoin or $200 on Apple tend to act as psychological support/resistance because so many orders cluster there.
Moving averages: The 50-day and 200-day SMAs often act as dynamic support and resistance.
Volume profile: Areas with high trading volume often become strong support or resistance zones.
Trading Support and Resistance
Buying at support: When price pulls back to a strong support level, with RSI oversold and a bullish candlestick pattern — this can be a high-probability buy zone. Place stop-loss below the support.
Selling at resistance: When price reaches resistance with RSI overbought and a bearish candle — this can be a good exit or short entry point.
Breakout trading: When price breaks above resistance with strong volume, the breakout can be traded. Wait for a retest of the broken level as new support before entering.
Educational only. Not financial advice. Practice these concepts in TradeProview's paper trading dashboard.