Support and Resistance Trading Strategy: Examples and Charts Analysis

Finding good opportunities in trading might involve understanding the concepts of support and resistance. These are like the building blocks of support and resistance trading strategies, and is a very popular approach for technically inclined traders.

Support and resistance are crucial concepts for many traders. They form the foundation of strategic trading. The main idea in trading is to identify favorable buying opportunities at support levels and advantageous selling opportunities at resistance levels. Support and resistance might help you achieve that, but it requires a lot of discretion.  

Let’s look at what it is and why it might serve as a useful heuristic in the complex markets:

What is support and resistance?

Support represents the point where the price of an asset is expected to halt its decline and potentially begin an upward movement.

Think of it like a floor that guides you on where to consider entering a long position when the price finds support.

On the flip side, resistance indicates the level which an asset’s price is expected to stop its ascent and potentially start declining.

Picture it as a ceiling that directs you on where to explore entering a short position when the price encounters resistance.

For example, the red line on the chart indicates resistance that requires time to break out of: