ADX

Convergence/Divergence

Cross Market Analysis

Day’s Profile

Day Trading

MACD

Market Depth

Market Open

Market Profile Analysis

Market Profile Charts

Market Profile Data

Market Profile Display

Market Profile Terms

Support/Resistance

Time Price Opportunity (TPO)

Time and Sales

Trading Education

Support/Resistance

Support and resistance are two important concepts that must be understood by every trader. Support and resistance levels help us to see where buyers and sellers are on the chart. Support occurs at point where there are an abundance of buyers, ready and willing to buy at the support level price. The exact opposite occurs at a point of resistance, the market has an abundance of sellers at the resistance level. The sellers outnumber the buyers and price tends to drop when resistance levels are met.

Price action at these critical levels will vary depending on the nature and the characteristics of the support or resistance. These specifics are addressed in detail in our technical analysis courses.

The key point that must be understood by traders regarding levels of support and resistance is that they don’t form at an exact point on the chart. They are typically visible as a narrow band or range of prices on the chart. Moreover, these range are often more flexible than they are rigid. The analogy often made is they are not levels of glass sheets but rather elastic rubber sheets.

Support and resistance ranges are extremely helpful in following price action and in performing a comprehensive technical analysis of any chart.

They help traders to identify areas on the chart of support where prices may be attractive for a buyer, and areas of resistance where sell signal may be generated. In other words they help us to determine entries and price targets for the entries. They also help us to identify price breakouts and breakdowns.

Once a support level is broken it often becomes a resistance level when prices return and come back up to visit it. The same holds true for resistance levels, once they are penetrated and prices rise above them they too eventually become support levels as prices increase and surpass them.
Support and resistance are dynamic and constantly changing. However traders must learn to identify them on their charts and more importantly use them to time their entries and exits.

Some traders look at Fibonacci Retracements to identify support and resistance levels, however this is not always a reliable method.