A support and resistance strategy trades price reactions at horizontal levels where the market has turned before - either the bounce off the level or the break through it. Support sits below price where buyers stepped in; resistance sits above where sellers did. It is the foundation the rest of the strategy toolkit stands on.
Draw levels that actually matter
The mistake beginners make is drawing too many levels. A useful level is obvious - price reversed sharply there, or paused at it more than once, and it is visible on a higher timeframe. Mark it as a zone a few pips wide, not a razor line, because reactions cluster around an area. A chart with four clear levels beats one with twenty faint ones, because the clear ones are the ones other traders see and react to.
Two ways to trade a level
- The bounce: enter as price rejects the level - a rejection candle at support, for example - with a stop just beyond it and a target at the next level. This is a mean-reversion-style trade.
- The break: enter when price closes decisively through the level, expecting continuation - a breakout trade. The old resistance often becomes new support (and vice versa), giving a clean retest entry.
The same level offers both trades; which one you take depends on context and your rules, not on hope.
Where the stop goes
The beauty of trading levels is that they define your risk. If you are trading a bounce at support and price closes firmly below, you were wrong - so the stop belongs just beyond the level, not at some arbitrary pip distance. Read where to place your stop loss for the full logic. A tight, level-based stop is what gives these trades their strong reward-to-risk.
Important: levels get "swept" - price pokes just beyond to trigger stops before reversing. That is why a candle close beyond a level is a far stronger signal than a wick through it, and why bounce traders often wait for rejection rather than catching the exact touch.
Support and resistance vs supply and demand
The two are cousins. Supply and demand zones focus on the area a big move departed from and favor fresh, first-touch reactions; classic support and resistance treats repeated tests as confirmation. Many traders combine them - a level that is also a fresh demand zone is a higher-conviction spot than either alone.
Backtest with the future hidden
Levels are subjective, so the honest way to test them is to draw them before you know what happens next. In a simulator you mark levels on the left of the screen, step forward bar by bar, and take every bounce or break your rules define - then let expectancy across 100+ trades tell you whether your level-reading actually has an edge.
Support and resistance FAQ
What is a support and resistance strategy?
It trades reactions at horizontal levels where price has turned before - either the bounce off the level or the break through it - with stops just beyond.
How do I draw levels correctly?
Mark obvious levels where price reversed sharply or paused repeatedly, use higher timeframes, treat them as small zones, and keep the chart uncluttered.
How do I backtest it?
Draw levels before revealing what price does next, replay bar by bar, take every bounce or break your rules define, and judge on expectancy.