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Prices do not move randomly through every level. They tend to pause, bounce or reverse in the same zones again and again, because traders remember them and place orders there.
What they are
Support is a zone below the price where buying has repeatedly stopped a fall. Resistance is a zone above the price where selling has repeatedly stopped a rise. Think of them as zones, not exact lines: a few pips (or a few dollars on gold) either side is normal.
How to draw them
- Start on a higher timeframe (D1 or H4).
- Mark clear swing highs and lows where the price turned sharply.
- Look for levels touched two or more times; more touches mean more traders are watching.
- Add round numbers (1.1000 on EUR/USD, 3,900 on gold) and the previous day's or week's high and low.
When a level breaks
When the price closes clearly through resistance, that old resistance often becomes new support (and vice versa). This is called a role reversal. A break on strong volume or after big news is more convincing than a brief poke that quickly reverses (a “false break”).
Using levels in a trade
- Buy near support with the stop loss just below the zone, not exactly on it.
- Sell near resistance with the stop loss just above the zone.
- Aim the take profit before the next opposite level.
Gold bounced three times near 3,850. You buy at 3,856 with a stop at 3,843 (below the zone) and target 3,895, just under resistance at 3,900. Risk $13 to make $39: about 1:3.
Check our technical summary tool and the daily analysis for levels on major markets.
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