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If you've ever looked at a price chart and wondered, “Why did the market turn around right there?” chances are, you were looking at a support or resistance level in action.
Support and resistance are the most fundamental concepts in technical analysis, and mastering them can help you spot potential entry and exit points with more confidence in trading.
Support is a price level where buying pressure is strong enough to prevent the price from falling further. It’s like a floor, when price hits it, it tends to bounce up. Think of it as the market saying, “This price is cheap enough to buy.”
If price hits the same level multiple times and bounces back up, that level becomes a strong support.
Example: Imagine the forex pair trade GBPUSD falling to $1.33860 three times over one month, and each time it bounces. That’s a strong support zone.
Figure 1.1: GBPUSD 4HR Timeframe (TradingView)
On the other hand, resistance is the point at which selling pressure stops the price from increasing any higher. It functions as a ceiling. The market sees it as expensive. Price may try to rise and fail near the same level repeatedly.
Example: If USD/CHF struggles to go above 0.8250 for a couple weeks and then falls, that’s resistance.
Figure 1.1: USDCHF 1HR Timeframe (TradingView)
Support and resistance help you:
Take profits at logical points where price may reverse
They also form the basis for more advanced trading strategies like breakouts, pullbacks, and range trading.
When price breaks below support, that level often becomes new resistance. Similarly, breaking above resistance can turn it into new support.
This simple flip is used by many traders to confirm a breakout and plan their CFD trades with higher accuracy.
Disclaimer: The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.
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