Support and resistance: the chart's map
These are the most useful concepts in technical analysis and the first ones you should master. Support is a "floor" where price tends to bounce up; resistance is a "ceiling" where it tends to turn down. They're not magic: they're the market's collective memory.
What they look like
Price rarely moves in a straight line. It rises, hits a ceiling (resistance), falls, finds a floor (support), bounces… until one day one of those levels breaks with force. That breakout often marks the start of a significant move.
Why they work
There's nothing mystical about it. A level matters because a lot of people remember it and act on it:
- Those who didn't buy at the previous floor "wait for another chance" and buy there again → holds the support.
- Those who bought high at the previous ceiling and got trapped "sell to break even" when price returns → reinforces the resistance.
- Many people's stops and orders cluster near those levels.
It's crowd psychology drawn on the chart. That's why "round" levels (1.2000 on EURUSD, $2000 on gold) tend to matter so much.
The flip that confuses everyone: support ↔ resistance
When a resistance breaks upward, it very often becomes support (and vice versa). The ceiling that used to cap now holds. This "role reversal" is one of the most reliable patterns and explains why price sometimes comes back to touch the broken level before continuing (the famous "pullback").
How to use them
Support and resistance give you two practical things: where you might enter (bounce off support, breakout of resistance) and — more importantly — where to place the stop-loss (just beyond the level, where your idea is proven wrong). Combine them with the right order and a calculated position size, never eyeballed.