Support and resistance are the most important concepts in price action. Support is a price area where buyers have historically stepped in and stopped price from falling further. Resistance is where sellers have stepped in and capped a rise. They are areas, not exact lines.
Why levels form
Levels form because market participants remember prices. Traders who bought at a level want to defend it; traders who missed a move want a second chance to enter; and traders who are trapped want to exit at breakeven. This collective memory creates repeated reactions at the same prices.
How to draw good levels
Draw your levels from the higher timeframes first and use candle bodies and wicks where multiple reactions cluster. The best levels are ones price has touched several times, ideally as both support and resistance. Avoid cluttering the chart — a handful of strong levels beats twenty weak ones.
- More touches usually mean a more significant level.
- Round numbers (whole figures) often act as psychological levels.
- Treat levels as zones a few candles wide, not a single pixel.
- A level broken with conviction can flip role — see the Retest module.
Support and resistance are zones of memory where buyers or sellers have acted before — and often act again.