Support and Resistance: How to Identify Strong Zones on the Chart and Use Them in Trading

Support and resistance are among the most fundamental concepts in technical analysis. Support is where a downtrend tends to pause due to buying pressure, while Resistance is where an uptrend often halts due to selling pressure. These zones act as invisible barriers for price action and help traders plan entries, exits, and risk management.

How to Identify Strong Support and Resistance Zones

Previous Highs and Lows: Levels where price has reversed multiple times.
Psychological Levels: Round numbers like 100, 1000, or 10,000.
Higher Timeframes: Daily/weekly levels are stronger than intraday ones.
Volume Confirmation: High volume at a level adds strength.
Confluence with Other Tools: Trendlines, moving averages, Fibonacci levels.

How to Use Support and Resistance in Trading Decisions

Buying Opportunities: Enter long trades when price bounces from support with confirmation (candlestick reversal, RSI oversold).

Selling Opportunities: Enter short trades when price rejects resistance with confirmation (bearish candlestick, RSI overbought).

Risk Management: Stop-loss below support for buys, above resistance for sells.

Target Setting: Aim for the next opposite support/resistance zone.

Common Mistakes to Avoid

Treating levels as exact lines instead of flexible zones.
Ignoring volume confirmation.
Cluttering charts with too many levels.

Conclusion

Support and resistance represent trader psychology in action. Mastering them helps identify reversals, continuations, and better trading opportunities. Learn more from Investopedia – Support and Resistance.