Support and resistance
Price areas where a fall or a rise has stopped before. Traders mark them to see where buyers or sellers have stepped in.
What support and resistance are.
Price areas where a move has stopped before, and where traders watch to see if it stops again.
Support is a price area where falling prices have stopped and turned up before. Buyers stepped in there, at least for a while.
Resistance is the opposite. It is an area where rising prices have stalled and turned down, because sellers outnumbered buyers.
Why do these areas matter? Traders remember the prices where a market turned, and many place orders near them. Those orders can slow or stop the next move.
That is a tendency, not a rule. Levels hold for a while, then break, and a broken level often changes its role.
How to draw them.
There is no formula. You find the levels on the chart itself.
Start on a higher timeframe.
Open a daily or four-hour chart first. Levels that stand out there are the ones many traders can see.
Find the turning points.
Look for places where price turned more than once. Two or three clear turns near the same price make an area worth marking.
Draw a zone, not a thin line.
Prices rarely turn at exactly the same tick. Mark the area that covers the wicks and closes around the turns.
Check it on your trading timeframe.
Move down to the timeframe you trade on and see how price behaves as it approaches the zone.
Keep the chart tidy.
Mark the nearest levels above and below the current price. A chart covered in lines is hard to read.
Not every high or low is a level. The turns that matter are the clear ones, where price moved away quickly and with conviction.
How traders read them.
Four ideas that come up again and again. Each describes what price has done, not what it will do.
Bounces.
When price reaches support and turns up, the level has held for now. Traders watch how strongly it turns, not just whether it touches.
Breaks.
A close beyond a level, not just a wick, shows the level gave way. Some traders wait for a second close before they accept the break.
Role reversal.
A broken resistance level can act as support when price comes back to it. Broken support can act as resistance in the same way.
Round numbers.
Prices such as 1.1000 on EUR/USD often attract orders. Many traders watch round numbers for that reason alone.
In the chart above, price meets resistance twice and turns down both times. The third push closes above it, and the old ceiling then sits underneath price.
Common mistakes.
Where traders new to support and resistance most often go wrong.
Treating a level as an exact price. Support and resistance are areas, and price often overshoots them a little.
Drawing too many lines. If every small turn gets a line, none of them stands out.
Assuming a level will hold because it held before. Levels do break, and some traders see repeated tests as a sign of weakness.
Acting on a wick through a level. A move that closes back inside the level is often a false break.
Trading without a plan for when the level fails. A stop-loss helps limit the loss, though it may not fill at the exact price in a fast market.
Drawing them on MetaTrader 5.
Two of MT5’s drawing tools cover it: a horizontal line and a rectangle.
Open a chart.
In MetaTrader 5, open the instrument and start on a daily or four-hour timeframe.
Add a horizontal line.
Go to Insert, then Objects, then Lines, and choose Horizontal Line. Click on the chart at the level you want.
Or mark a zone.
Go to Insert, then Objects, then Shapes, and choose Rectangle. Drag it across the area where price has turned.
Choose where it shows.
Right-click the object and open its properties. The Visualization tab sets which timeframes it appears on.
Questions, answered.
What traders ask most about support and resistance.
01What is the difference between support and resistance?
02How many touches make a level?
03Which timeframe should I use?
04Why did price break straight through my level?
05Can I practise drawing levels first?
Practise it on a demo.
Mark support and resistance on a free MT5 demo and watch how price behaves around your levels before you trade with real money.
Trading CFDs on a live account puts your capital at risk and you can lose money. A demo does not.