Trading style? You need to understand "support and resistance levels" before it's too late.

If you still trade without knowing support and resistance levels, it’s like driving on a road without traffic signs. You might get lucky sometimes, but it’s not sustainable. This tool not only helps you find good entry and exit points but also assists you in building your own trading system.

Before trading, you need to understand what “Support” and “Resistance” are

Finding Support (Support) and Resistance (Resistance) is about predicting where the price will stop or reverse. This technique uses chart patterns to help identify safe zones for entering trades.

Support is a price zone where the price stops falling and tends to bounce back up (Pattern: Downtrend → Stop → Uptrend)

Resistance is a price zone where the price stops rising and tends to reverse downward (Pattern: Uptrend → Stop → Downtrend)

Interestingly, when a strong resistance level is broken, it often turns into a new support level. Similarly, when a support level breaks down, it can become a new resistance.

Why does this happen? Economics vs. Psychology

From an economic perspective:

Prices move due to demand (Demand) and supply (Supply) that are out of balance.

• When selling exceeds demand, prices fall to the support point (Support)
• When buying exceeds demand, prices rise to the resistance point (Resistance)

From a psychological perspective:

The market divides traders into 3 groups:

1. Buyers who have already bought - waiting for prices to go up to sell for profit
2. Sellers who have already sold - waiting for prices to go down to buy back profitably
3. Uncommitted traders - observing and waiting for opportunities

When prices drop to a level where everyone thinks “it’s cheap,” many buyers jump in, creating a support point. Conversely, when prices rise to a level where everyone thinks “it’s expensive,” many sellers enter, creating a resistance point.

5 ways to accurately identify support and resistance points

1. Trendline Method - Draw trend lines

Uptrend: Draw a line through higher lows (Higher Low) → this is a support point. Draw a line through higher highs (Higher High) → this is a resistance point.

Downtrend: Draw a line through lower highs (Lower High) → this is a resistance point. Draw a line through lower lows (Lower Low) → this is a support point.

2. Round Number Method - Numbers ending with 0

Round numbers have strong psychological power, such as:

• Prices often face resistance because everyone sees them as “expensive”
• Prices often find support because everyone sees them as “cheap”
• Examples: $50, $200, $100 also have similar effects

$10 3. Moving Average Method - Using the moving average

A single moving average can serve as support or resistance depending on the trend:

• Uptrend: Moving average acts as support $500 Price stays above the line###
• Downtrend: Moving average acts as resistance (Price stays below the line)

Prices often temporarily break out from the moving average and then retest it.

( 4. Fibonacci Method - Golden ratio

Fibonacci retracement uses ratios 23.6%, 38.2%, 61.8%, 78.6% to find potential reversal points.

Example: An uptrend stock retraces 23.6% to $17.64 → this is the first support point.

) 5. Gap Method - Price gaps

Price gaps ###where the price jumps over a space$10 often become strong support or resistance levels because no trading occurs in that area.

• Uptrend: Gaps act as support
• Downtrend: Gaps act as resistance

3 real trading strategies using support and resistance

$20 Strategy 1: Range Trading ###Range Trading(

Effective when prices move between two lines:

• Buy at support )Lower boundary###
• Sell at resistance (Upper boundary)
• Exit all positions if the range breaks

( Strategy 2: Reversal Trading )Reversal(

Effective when prices are about to change direction:

• Uptrend: Price hits resistance → Sell or short
• Downtrend: Price hits support → Buy

) Strategy 3: Breakout Trading ###Breakout(

Effective when prices break support or resistance:

• Break resistance )Uptrend###: Buy and let the price run. Resistance becomes new support.
• Break support (Downtrend): Sell and let the price fall. Support becomes new resistance.

Important warning: 3 things traders should avoid

( ⚠️ Tip 1: Don’t trade against the trend

“The trend is your friend” - If the trend is up, don’t sell just because the price touches resistance. Wait for clear reversal signals.

) ⚠️ Tip 2: Support points must be tested multiple times

Support that has been tested several times and still holds is strong. But remember, any level can break. Always use stop loss.

( ⚠️ Tip 3: Beware of False Breakouts - Fake breakouts

Prices sometimes spike through resistance but then come back. This is called a false breakout. Prevention tips:

• Watch trading volume )Volume### - if low, be cautious
• Set stop loss at key levels to avoid large losses

Final words

Support and resistance are not 100% precise science, but they are among the best tools to help you trade quickly. When combined with good risk management, they form the foundation of a successful trading system.

Final advice: Practice on a demo account first. Train yourself to identify support and resistance correctly. Once confident, then trade live.