Support & resistance

Support is an area where buying stepped in before. Resistance is an area where selling stepped in before. That's all. The useful question is why they stepped in there, because that tells you whether they're likely to again.

Areas, not lines

Markets don't respect a price to the tick. Draw zones — a small band around the level — and expect price to probe a little beyond them. If your plan breaks because price went two ticks past your line, the plan was too precise.

Which levels matter

Not every swing high deserves a line. Better levels have a reason behind them:

• Prior session high and low — where yesterday's auction stopped.
• Areas of heavy volume — where a lot of business was done (more on this in the volume profile lesson).
• Clean rejections — sharp turns with little time spent at the price.
• Session references — the overnight high/low, the opening range.

A chart with three meaningful levels is more useful than one with fifteen.

What happens at a level

When price reaches a level, one of two things happens:

1. Rejection — price touches the area and turns away. The previous participants defended it.
2. Acceptance — price trades through and stays, building time and volume beyond it. The market has found new business on the other side.

The mistake is deciding in advance which one it will be. Plan for both:

• If it rejects, what's my entry, my stop and my target?
• If it's accepted, what does that change — and is there a trade in the new direction?

Flipping roles

When resistance is accepted through, it often becomes support on the retest, and vice versa. The participants who sold there are now wrong; some of them will buy back near their entry. It's a tendency, not a rule — confirm it with how price behaves on the retest.