FBS turns 16

Unlock birthday rewards: from gadgets and dreams cars to VIP trips.Learn more
Open account
Open accountLog In
Open account

May 25, 2023

Technical analysis

Support and Resistance

The concept of support and resistance is essential for traders. Support and resistance represent areas where the price action is expected to face obstacles. Let’s study this in detail.

Support is a price level where the falling price tends to slow down or reverse. This means the price is more likely to “bounce” off this level rather than break through it. However, once the price has passed this level, it will likely continue dropping until it finds another support level.

Resistance is a price level where rising prices slow down or reverse. The price will likely bounce back from this level rather than a breakthrough. However, a break above this level opens further price growth until it finds another resistance level.

How to trade?

Support and resistance allow traders to guide themselves through the market. Once you mark these levels on the chart, you will see the market structure and be able to predict the direction of the price’s next steps and their size.

The idea is that these levels will likely stop the price action and make it reverse. As a result, it’s a common approach to open buy trades at support and sell trades at resistance. Support and resistance levels also give a trader a hint of where to close a trade. Thus, if you have an open selling position and the price is approaching a support level, you might consider closing your trade. The same thing is with a buy trade – when the price approaches the resistance level, it may be time to close your trade.

Support and resistance can be located in every timeframe. Yet, keep in mind that the bigger the timeframe, the more important the support/resistance level is. In addition, although we talk about levels here, trading is not a precise science, so you need to think about support and resistance as an area. When you’ve identified support or resistance, you need to include a couple of pips around it. This will help you make your trading more accurate.

How to draw inclined support and resistance lines

Support and resistance come in different forms. Firstly, there are the diagonal trendlines. A trendline can connect the price’s highs and limit the trend on the upside. In this case, this trendline is called a resistance line. A trendline can also be drawn through the lows of the price chart and limit the price action on the downside. Such a line is called a support line.

Support and resistance lines can be drawn in both uptrends and downtrends. You need at least two highs or two lows to draw a trendline through them. You can find more information about drawing trendlines.

image1.png

As the market is constantly moving, support and resistance lines and levels often switch places. As you can see in the picture below, after the price fell below the support line, it started to act as a resistance line.

image2.png

Horizontal support and resistance levels

There are also horizontal support and resistance levels. One of the simplest and most effective ways is to draw them through the previous highs and lows of the price chart:

image3.png

Other experienced traders also use moving averages, Fibonacci levels, pivot points, etc., to identify support and resistance levels.

Share with friends:

Open an FBS account

By registering, you accept FBS Customer Agreement conditions and FBS Privacy Policy and assume all risks inherent with trading operations on the world financial markets.

FBS at social media

iconhover iconiconhover iconiconhover iconiconhover icon

Contact us

iconhover iconiconhover iconiconhover iconiconhover icon
store iconstore icon
Get on the
Google Play

Trading

Company

About FBS

Our social impact

Legal documents

Company news

FC Leicester City

Help Center

Partnership programs

The website is operated by FBS Markets Inc.; Registration No. 000001317; FBS Markets Inc. is registered by the Financial Services Commission under the Securities Industry Act 2021, license number 000102/31. Office Address: 9725, Fabers Road Extension, Unit 1, Belize City, Belize.

FBS Markets Inc. does not offer financial services to residents of certain jurisdictions, including, but not limited to: the USA, the EU, the UK, Israel, the Islamic Republic of Iran, Myanmar.

Payment transactions are managed by HDC Technologies Ltd.; Registration No. HE 370778; Legal address: Arch. Makariou III & Vyronos, P. Lordos Center, Block B, Office 203, Limassol, Cyprus. Additional address: Office 267, Irene Court, Corner Rigenas and 28th October street, Agia Triada, 3035, Limassol, Cyprus.

Contact number: +357 22 010970; additional number: +501 611 0594.

For cooperation, please contact us via [email protected].

Risk Warning: Before you start trading, you should completely understand the risks involved with the currency market and trading on margin, and you should be aware of your level of experience.

Any copying, reproduction, republication, as well as on the Internet resources of any materials from this website is possible only upon written permission.

The information on this website does not constitute investment advice, a recommendation, or a solicitation to engage in any investment activity.