Lesson 4 of 6 · 8 min

Support and Resistance

Support is an area where a decline has stopped in the past, and resistance is an area where a rise has stopped. They are not walls. They are places where a good number of participants have shown they are ready to act, so it is reasonable to assume that someone will notice them again.

Why would this work at all? People remember prices. Someone who bought at 58,000 and watched the price fall often wants to get out “without a loss” when the price returns. Someone who missed the bounce waits for the same price. Many place orders around round numbers. None of this is a law, but it explains why levels are sometimes respected.

Draw zones, not lines

The price rarely turns at exactly the same number. If the lows were 58,000, 58,250 and 58,400, the level is a zone from 58,000 to 58,400. A level counts for more if it is visible on a larger timeframe and if the price clearly bounced from it. Opinions differ on the number of touches: more touches mean the level is well known, but each touch uses up the orders that defend it.

Breakout and role reversal

When the price breaks through resistance and holds above it, the old resistance often becomes the new support. The same applies in reverse. We say often, not always. The classic form is a breakout, a return to the old level and a bounce from it.

A false breakout (fakeout) is a moment when the price crosses a level with a wick and returns. That is exactly why a breakout is usually measured by the close of the candle, not by a touch. Example: resistance is 61,300. A candle has a high of 61,700 but closes at 61,100. There was a touch, but no breakout by close. The price of this approach is delay: confirmation comes later and at a worse price. There is no free solution, you choose between an earlier entry with more false signals and a later one at a worse price.

Levels on the portal

In Analyses the portal deliberately uses the simplest possible definition: the upper level is the highest high and the lower level is the lowest low of the 48 closed hourly candles before the last closed one. No drawing and no impressions, so everyone gets the same number. It does not claim these are the “real” levels, only that they are easy to verify. You will read everything about them in the indicators module.