Module 12: Support and Resistance
Key Takeaways
- Support is a price floor where buyers tend to step in.
- Resistance is a price ceiling where sellers tend to step in.
- Broken support often becomes resistance, and vice versa.
- Levels come from supply and demand imbalances.
Supply and demand
Support and resistance exist because of supply and demand. At a demand zone, buyers outnumber sellers and price tends to bounce up (support). At a supply zone, sellers dominate and price tends to fall (resistance). These are areas, not exact lines.
Horizontal levels
The simplest and most reliable levels are horizontal: prices where the market repeatedly reversed in the past. Mark the points where price clearly bounced or rejected multiple times. The more touches, the stronger the level.
When support breaks, it often flips into resistance (and vice versa). This “role reversal” is one of the most useful concepts in trading.
Dynamic support and resistance
Unlike fixed horizontal levels, dynamic S/R moves with price. Moving averages (e.g. the 50 or 200 EMA) and trendlines act as dynamic support in uptrends and dynamic resistance in downtrends. Price often pulls back to them before continuing.
Example
If gold repeatedly bounces at $2,300 and stalls at $2,380, those are your support and resistance. A close decisively below $2,300 would flip it to resistance, suggesting further downside.
Draw levels on higher timeframes (4h, daily). They carry far more weight than levels on a 1-minute chart.
Frequently Asked Questions
Treat them as zones. Price rarely respects an exact tick — give your levels a little breathing room.