Nick Goold
Why Support and Resistance Matter
Traders can use many different indicators, but support and resistance are two of the most important things to understand. Almost every trader watches these levels because they show areas where price may stop, change direction or break through and continue moving.
Support and resistance can help you decide when to enter and when to exit a trade. For example, buying just below strong resistance may be risky because price could struggle to move higher. Knowing where the important levels are can also help you choose where to take profit or close a trade.
Support and resistance can appear in different ways. They may be previous highs and lows, round numbers, moving averages or trend lines. A level can also change its role — old resistance can become support, and old support can become resistance.
Before entering a trade, try to know where the main support and resistance levels are. The interactive lesson below explains how to find them and then gives you different charts to practise identifying them yourself.
Use Support and Resistance for Entry Points
Once you can identify support and resistance, the next step is deciding how to trade around these levels. A simple approach is to look for buying opportunities near support and selling opportunities near resistance.
But support and resistance do not always hold. If price breaks strongly above resistance, traders may look for opportunities to buy above the level. If price breaks below support, they may look for opportunities to sell below it.
Decide Whether the Market Is Trending or Ranging
The important question is whether you expect support or resistance to hold or break. This often depends on whether the market is moving in a range or a strong trend.
In a range, buying near support and selling near resistance can make sense. In a strong uptrend, however, it may be better to wait for resistance to break and then look for a buy. In a strong downtrend, you may wait for support to break before looking for a sell.
There are several ways to judge the strength of a trend. Look at the direction and slope of moving averages, check longer-term charts to understand the bigger picture, and consider the fundamental reasons behind the market move.
Strong Trends Can Break Important Levels
Do not automatically assume that every support or resistance level will stop the market. When a trend is strong, price can move straight through an important level.
For example, in a strong uptrend, buying before resistance can sometimes be profitable if you expect a breakout. In a strong downtrend, selling before support can also work if you expect the level to break.
The stronger the trend, the more important it is to consider a possible breakout rather than automatically trading against the move.
Use Support and Resistance for Exit Points
Support and resistance can also help you decide when to exit. If you are buying and price reaches resistance and starts to slow down or reverse, it may be a good time to take profit. If you are selling, the same idea applies when price reaches support.
If price breaks through an important level with strong momentum, you may decide to stay in the trade and target the next support or resistance level instead. This can help you take profits when a move is losing strength while giving strong trends more room to continue.
Build a Support and Resistance Routine
Before entering a trade, identify the main support and resistance levels and ask yourself: Is the market trending or ranging? Do I expect this level to hold or break? Where is the next important level if price continues moving?
There is no single correct way to trade every level. The goal is to always know where the important support and resistance levels are and then combine this information with the current market conditions to make better entry and exit decisions.
Keep Learning and Improve Your Trading
Support and resistance are a key part of technical analysis, but they work best when combined with other trading skills. The Titan FX Education Hub has courses for beginners through to advanced traders, covering Basics, Markets, Strategy, Risk Management, Psychology and Copy Trading. You can also learn through articles and quizzes.
Explore the Titan FX Education Hub
You can also use the Support and Resistance tool in the Titan FX Research Hub to find important price levels across different markets and add them to your own analysis.
