support and resistance is often tght as a beginner strategy but here's the twist it's actually one of the most misunderstood Concepts in trading this is the guide you need to watch if you really want to trade T levels like a professional Trader trading is all about finding edges and support and resistance levels are one of the most powerful edges you can have but these invisible lines on your charts can make or break your TR rates basically support and resistance are price levels where the market tends to pause or reverse support is an area that catches
falling prices resistance is an area that stops prices from rising further and it's all about supply and demand at support buyers step in they see the price as a bargain and start buying at resistance sellers take over they think the price is to high and start selling here's the key these levels aren't exact prices they are more like zones where interesting things happen but why should you care about support and resistance first they help you understand Market structure you can see where price is likely to pause or reverse this knowledge is gold for timing your
entries and exits second these levels show you where other Traders are placing their orders big players often cluster their orders around support and resistance and when you know where the big money is that's your Edge we'll talk about that later third support and resistance levels are self-fulfilling Traders expect price to react at these levels so they Place their orders accordingly this Collective action makes those areas even more interesting now let's dive into the minds of buyers and sellers at this key price points at support levels buyers tend to step in seeing the price as a
good deal they believe the price is undervalued and expect it to rise from this point this buying pressure often causes the price to bounce off support at resistance levels sellers become more active they view the price as too high and anticipate a drop leading to increased selling pressure this Behavior creates a self-fulfilling prophecy as more Traders watch these levels and act on them their Collective actions make the levels more likely to hold at least temporarily Market memory plays a crucial role in shaping these zones Traders remember past price levels where significant buying or selling occurred
these memories influence future trading decision decisions the concept of Trapped Traders also contributes to Market memory imagine a Trader who bought at a certain price only to see the market drop he might be eager to sell at a break even when the price returns to his entry point this creates resistance as these trapped Traders exit their positions support and resistance zones often form around round numbers ending in zero or double zeros this is partly due to the psychological Comfort we find in round numbers many Traders Place orders at these levels creating natural support and resistance
the strength of support and resistance levels can change over time a level that's been tested multiple times without breaking becomes more significant in Traders minds but it also becomes more likely to eventually break as more Traders are watching it and positioning themselves around it when a support or resistance level does break the ensuing price move can be dramatic this is because many Traders Place their stop-loss orders just beyond these levels when the level breaks it triggers a Cascade of orders accelerating the price move this behavior is often exploited by large Market players who might push
the price through a level to to trigger these stops before reversing the move high quality support and resistance levels have several special trades that make them stand out on a chart one of the most prominent features of strong levels is the presence of sharp big reversals these are points on the chart where the price makes a sudden and significant change in direction for example if price is falling rapidly and then suddenly bouncing is back up just as quickly this sharp reversal could indicate a strong support level this dramatic price movements suggest that there's a significant
imbalance between buyers and sellers at these levels leading to Quick reversals high quality support and resistance levels often show multiple instances of price bouncing off them this repeated Behavior reinforces the importance of this levels for inance if you notice that a stock price has bounced up from a level several times this could be an important support level these multiple bounces demonstrate that Traders consistently recognize these levels Anda on them creating a self-fulfilling prophecy swing highs and lows are another important feature to look for because they represent areas where the balance between buyers and sellers shift
at significantly high quality levels often demonstrate the ability to act as both support and resistance this characteristic known as roll reversal happens when a broken support level becomes a new resistance level or when a broken resistance level becomes a new support level this phenomenon happens because Traders remember these levels and adjust their behavior accordingly one of the key traits of high quality support and resistance levels is that they are visually obvious on a chart these levels should stand out clearly even to an inexperienced Trader if you have to squint your eyes to identify a level
it might not be as significant as you think the most powerful support and resistance levels are those that are immediately apparent when you look at a chart this visual prominence is important because it means that many Traders are like to notice and act on these levels increasing their potential impact on price movements support and resistance levels that have been recently respected tend to be more reliable than older levels this is because market conditions change over time and levels that were significant in the distant past May no longer be relevant look for levels that have influenced
price movements in the recent past as these are more more likely to continue playing a role in current and future price action round numbers often act as psychological support and resistance levels for instance many Traders might set their takeprofit orders at $100 if a stock is approaching that level From Below or they might set stop-loss orders just below $100 if the stock is trading above it this clustering of orders around round numbers and create noticeable support and resistance effects the strongest support and resistance levels typically combine multiple traits for example a level might be a
round number have acted as both support and resistance in the past show multiple bounces and be easily visible on the chart the more of these characteristics level exhibits the more likely it is to be a significant support or resistance point and when drawing support and resistance lines on your charts remember that they don't always need to be exact prices can sometimes break slightly past these levels before reversing known as a false breakout or they might reverse Direction just before reaching the level an imperfect reversal so you might need to draw a wider Zone rather than
a precise line to capture all the relevant price action now before we continue let us know in the comments what topics you'd like us to cover please tell us what you want to watch next now let's talk about support and resistance flips when price breaks through a support level it shows a shift in power from buyers to sellers the former support level then often becomes a new resistance level this happens because traders who bought at a support level and are now facing losses may sell when the price returns to that level creating resistance when price
breaks above a resistance level that level can become a new support level as traders who missed the initial move up may buy at the former resistance now viewing it as a good entry point these flips demonstrate the psychological aspects of trading Traders remember price levels where significant shifts occurred and their Collective actions around these levels can create self-fulfilling prophecies the strength of these flipped levels often depends on how decisively the original level was broken a strong high volume break of a support or resistance level is more likely to result in a reliable flip than a
weak break on low volume the number of times a level has acted as support or resistance in the past also influences its strong strength after a flip a level that has been tested multiple times before breaking is often more significant when a support or resistance level is broken wait for a retest of that level before entering a trade if a former support level holds as new resistance or vice versa it can confirm the breakout sometimes a level will fail to hold after flipping for example a broken support level might not hold as resistance these failed
flips can lead to strong moves in the opposite direction as traders who were counting on the level holding are forced to exit their positions when trading support and resistance flips consider the overall Market context in strong Trends flipped levels are more likely to hold while in choppy or ranging markets they may be less reliable volume can provide additional confirmation high volume on the initial break and again on the retest can increase the likelihood of a successful flip and it's also important to note that not all support and resistance levels will flip cleanly or hold after
flipping the market is dynamic and even strong levels can be broken under the right circumstances one powerful aspect of support in resistance flips is that they often Mark the beginning of new trends when a longstanding resistance level is finally broken and then holds a support it can signal the start of a significant uptrend when a strong support level breaks and then acts as resistance it might indicate the beginning of a downtrend liquidity runs at support and resistance are a key part of how big players move the market these moves also called stop hunts or liquidity
grabs aim to trigger stop losses and force Traders out of positions the reality is that big players need liquidity to enter and exit large positions they often find this liquidity clustered around support and resistance levels that's where many Traders Place their stop losses and entry orders think about it if you're buying at support where do you put your stop loss usually just below that level if you're selling at resistance your stop is likely just above big players know this and use it to their advantage a typical liquidity run might look like this price approaches a
key support or resistance level it briefly breaks through triggering stop losses and breakout entries then price quickly reverses trapping Traders on the wrong side these moves can be frustrating if you're caught in them but they're not random they serve a purpose for big players to build positions at better prices for example if big players want to buy they might push price down to hit stop losses below support this creates selling pressure driving price lower the big players can then buy at these lower prices before letting price rise again to protect yourself from liquidity runs use
wider stops don't place them just beyond obvious levels also wait for confirmation never enter on the first break of a level but you can do more than just avoid these traps you can profit from them by thinking like the big players instead of buying at support wait for a potential stop run below it then buy when price starts to recover you're now buying at a better price aligned with the big players and resistance wait for a push above the level before looking to sell this strategy requires patience and practice but it can lead to better
entries and less risk remember liquidity runs often happen at the most obvious levels previous day highs and lows round numbers major swings and levels tested multiple times are prime targets to spot potential liquidity runs watch for Price approaching a key level with increasing momentum price action that seems to defy logic or previous patterns unusual volume spikes near the level quick reversals after breaking a level unusual Candlestick patterns with long Wicks or does and multiple tests of a level in a short time this pattern suggest big players might be trying to trigger stops or attract breakout
traders of course not every break off support or resistance is a liquidity run sometimes levels break cleanly the key is to watch how price behaves after the break in a true liquidity run price usually reverses quickly if it continues strongly in the breakout Direction it's more likely a genuine move to profit from liquidity runs you need to be patient and disciplined don't chase the initial breakout wait for signs that the move is losing steam or reversing for example if price breaks below support but starts to form bullish candles it might be time to consider a
long trade your stop can go below the recent low giving you a tight risk this approach aligns you with how big players trade they're not trying to pick exactly tops and bottoms they're looking to enter after the liquidity run when smaller Traders are getting stopped out or chasing the move in the wrong direction also consider the bigger picture liquidity runs on Lower time frames might be ins significant noise in the context of larger Trends always start your analysis on higher time frames to identify the most important levels another tip a liquidity run that goes against
the main trend is often a good opportunity to enter in the trend's direction if the overall trend is up a stop run below support might be a great place to buy as you gain experience you'll start to see liquidity runs as opportunities rather than threats volume is a key tool in trading support and resistance it's like a secret code that reveals the strength of these levels when you mix volume with price action you get a powerful method called volume price analysis as you already know not all levels are the same some are strong and some
are weak and how do you know which is which that's where volume comes in think of volume as the fuel that drives the market when there's a lot of volume at the price level it means there's a lot of interest there this can create strong support or resistance the volume profile tool is great for finding these key levels it shows you where most trading happened the areas with the most volume are often important support and resistance zones when you look at a volume profile focus on three main levels first the point of control this is
where most trading occurred it's often a strong support or resistance level then the profile high this can act as resistance and lastly the profile low this can act as support these levels matter because they show where buyers and sellers were most active they're like battle lines where the big players fought over price when price nears a key level watch the volume closely if price breaks through with high volume it's often a real breakout but if it breaks through with low volume it might be a fake out on the flip side if price touches a level
and bounces off with high volume that's a strong Rejection it means the level held firm but if it bounces with low volume the level might not be as strong as it looks here's a cool trick when price makes a big move away from a level use the volume profile to see where the most trading happened during that move that spot often becomes a new support or resistance level when price returns to it later let's say you see a big price drop you can put a volume profile on that drop to find where the most trading
occurred that area might become resistance when price rises again if it does it could be a great place to sell remember the market Moves In Waves it trends for a while then pauses in a congestion phase then either keeps trending or reverses understanding how volume works with these moves is key to reading the market when you're looking at a potential trade don't just look at the price check the volume too is it above average that's a sign of strength is it below average that might mean the move is weak if you're thinking about buying at
support look for high volume as price touches that level that show strong buying interest if you're thinking about selling at resistance look for high volume there too that can mean strong selling pressure as we already talked false breakouts and liquidity runs are common traps in trading when price breaks through a key level don't just jump in right away wait for volume to confirm the move a true breakout should come with above average volume and if volume is low it might be a fake out but here's a cool trick sometimes a failed breakout can be an
even better trade if price breaks out on low volume and then quickly reverses that can be a strong signal to trade in the opposite direction don't forget about time frames what looks like a breakout on a 5minute chart might just be noise on a daily chart always check higher time frames to get a big picture before making your decisions learning to read volume in conjunction with support and resistance takes practice but it's worth the effort you'll see trading opportunities you never noticed before trading support and resistance will differ considering if the markets are trending or
they are ranging and most Traders don't think about this aspect which is a major mistake in a strong Trend support support and resistance levels can help you catch big moves when the market is trending up or down with Force it's not wise to fight it instead look for ways to join the trend at good prices here's how to use these levels in a strong uptrend as price climbs it will often pause and drop back a bit these dips often stop at Old resistance levels which now act as support sometimes price price will move sideways for
a while this is like a pause in the trend it can form a small range near a support or resistance level watch for breakouts when price breaks above the high of the consolidation it can signal the trend is ready to continue in a strong downtrend you'd use the same ideas but in reverse look for bounces from resistance consolidations and breakdowns below support ranging markets are trickier price bounces between support and resistance without a clear Direction here's how to use these levels first identify the range look for Clear areas where price has turned multiple times wait
for tests of these levels as price approaches support or resistance watch closely how it acts here can tell you a lot you then look for rejection signals if price touches support and bounces up with force it might be a good time to buy if it hits resistance and drops hard consider selling be cautious of false breakouts price often pokes above resistance or below support only to reverse look for wicks or multiple Wicks outside the range watch for consolidations near the top or bottom of the range a consolidation within the consolidation if price forms a tight
range it can signal a potential breakout of course use volume high volume on a bounce off support can signal a strong move low volume might mean the move is weak in ranges you're often looking to buy near support and sell near resistance but be ready to change your view if the range breaks and a new trend starts and consider the time frame levels on a daily chart might not match what you see on a 5-minute chart be clear about your trading Horizon here are some useful tools for finding hidden support and resistance levels first one
involves Fibonacci retracements this use special ratios to find hidden price levels this is how to use them first find a big price move up or down then draw a line from the start to the end of this move the tool will show you the main levels of this move and these levels often act as support or resistance that's because many Traders watch them when lots of people act on the same levels it can make them work in an uptrend price might pull back to these levels they could act as support in a downtrend price might
bounce off these levels as resistance but you don't just buy or sell at a fib level wait for price to to show it's respecting the level use fibs with other tools they work best when they line up with other support or resistance levels this is called a Confluence pivot Points are another great way to find daily levels they're based on previous days high low and close and they can show possible support and resistance for the current day this is how to use pivot Points first look for price to pause or turn at these levels if
price is above the main pivot it might be bullish below the pivot might be bearish use S1 and R1 for first targets S2 and R2 for bigger moves watch how price acts at the pivot a break above or below can signal the day's Direction pivot Points work well in ranging markets and they're less useful in strong trends remember using just one tool isn't enough smart Traders combine methods so look for overlaps if a fib level pivot point and round number all line up that's a strong level also use multiple time frames a daily pivot might
match a weekly FIB level and add price action watch for Candlestick patterns at these levels time frames play a big role in finding and using support and resistance effectively these levels gain strength when they are visible on higher time frames a level that shows up on a daily chart is often more significant than one on a 5minute chart this is because higher time frame charts represent more trading activity and longer term Market sentiment when you spot a level on a higher time frame it often acts as a stronger support or resistance point more Traders are
likely watching it and it may take more buying or selling pressure to break through for example if you see a clear support level on a weekly chart it might hold even if price dips below it briefly on an hourly chart this is why many Traders start their analysis on higher time frames and then zoom in for more detail lower time frame charts can show you more precise entry and exit points they are also useful for short-term price action around major levels on Lower chart you'll see early signs of a level breaking or holding but remember
lower time frame moves are often just noise in the bigger picture a level that looks important on a 5minute chart might mean nothing on a daily chart the solution for combining the higher with the lower charts is a multiple time frame analysis here's how to use it start with a higher time frame to get a big picture I like to use the daily chart then move to your trading time frame to find specific setups the hourly chart is a good one then use a lower time frame to fine-tune entries and exits of course you may
use other combinations you might use a weekly chart to find major levels a daily chart to ident Iden ify Trend Direction and a 4-Hour chart to enter trades this is a very important strategy it will help you understand the overall Market context and you'll avoid trading against a bigger Trend plus you'll find better entry points for your trades now if you liked what you saw we have plenty more interesting trading guides for you [Music]
