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Support & Resistance Levels Strategy
Master the art of trading support and resistance levels - the foundation of technical analysis
Difficulty
Intermediate
Risk Level
Medium
Best For
All Timeframes
Success Rate
High
What are Support & Resistance Levels?
Support and resistance levels are price levels where buying (support) or selling (resistance) pressure becomes significant enough to halt or reverse price movement. These levels are formed by previous price action and represent psychological barriers in the market.
Support = Price level where buying pressure overcomes selling pressure
Resistance = Price level where selling pressure overcomes buying pressure
Breakout = Price moves through the level with increased volume
Types of Support & Resistance
Support Levels
Major Support
Strong buying pressure, multiple tests
Minor Support
Recent lows, weaker buying pressure
Dynamic Support
Moving averages, trend lines
Resistance Levels
Major Resistance
Strong selling pressure, multiple rejections
Minor Resistance
Recent highs, weaker selling pressure
Dynamic Resistance
Moving averages, trend channels
Trading Rules
BUY at Support
- 1.Identify strong support level (previous lows, round numbers)
- 2.Wait for price to approach the support level
- 3.Look for bullish reversal candlestick patterns
- 4.Enter long when price bounces off support with volume
SELL at Resistance
- 1.Identify strong resistance level (previous highs, round numbers)
- 2.Wait for price to approach the resistance level
- 3.Look for bearish reversal candlestick patterns
- 4.Enter short when price rejects resistance with volume
Breakout Trading
Breakout Entry Rules
Bullish Breakout (Buy)
- ✓ Price breaks above resistance with strong volume
- ✓ Retest of broken level becomes new support
- ✓ Enter on retest or immediate breakout
- ✓ Stop loss below recent swing low
Bearish Breakout (Sell)
- ✓ Price breaks below support with strong volume
- ✓ Retest of broken level becomes new resistance
- ✓ Enter on retest or immediate breakout
- ✓ Stop loss above recent swing high
Risk Management
Stop Loss Placement
Place below support (for longs) or above resistance (for shorts)
Position Sizing
Risk 1-2% of capital, smaller for weaker levels
Take Profit
Target next resistance/support level or 2:1 reward ratio
Confirmation
Always wait for price action and volume confirmation
Disclaimer
Support and resistance levels are not guaranteed to hold. They represent areas of interest where price may reverse or break through. Always combine S&R analysis with other technical indicators and use proper risk management. This strategy works best when combined with volume analysis and price action confirmation.