19. Support and Resistance

Support and Resistance – The Backbone of Technical Trading

By now, you’ve learned about Order Blocks, Fair Value Gaps, and even Liquidity Sweeps. With your broker connected to MT5, charts up on TradingView, and trades flowing through your RedotPay wallet, it’s time to understand one of the most foundational elements of technical analysis — Support and Resistance.

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What is Support and Resistance?

Support is a price level where a falling market tends to pause due to buying interest. Think of it as a floor — when price hits this level, it often bounces back up.

Resistance is the opposite — a level where the market tends to reverse while rising, due to selling interest. It acts like a ceiling — when price reaches it, it struggles to go higher.

📌 In simple terms:

• Support = buyers defend this level
• Resistance = sellers defend this level

Why Support and Resistance Matter

Support and resistance zones are psychological levels where traders make decisions. Price tends to react strongly at these levels because they reflect collective market memory.

• They help identify entry and exit points
• Allow for risk management with stop-loss and take-profit placement
• Align with key institutional levels

Types of Support and Resistance

1. Horizontal Support/Resistance
   • Based on previous highs and lows.
   • Easily drawn on charts and widely used.
2. Dynamic Support/Resistance
   • Moving averages like the 50 EMA or 200 EMA.
   • Adjusts as price changes, providing trend-following insights.
3. Trendline Support/Resistance
   • Diagonal levels in trending markets.
   • Help visualize momentum and reversal zones.
4. Psychological Levels
   • Round numbers like 1900 in Gold, or 30,000 in Bitcoin.
   • Attract institutional attention.

Support and Resistance Flip (Role Reversal)

One of the most powerful concepts is the flip — when support becomes resistance or resistance becomes support.

Example: Resistance to Support Flip

1. Price tries multiple times to break above a level but fails (resistance).
2. Eventually, it breaks through and retests the same level from above.
3. That former resistance now acts as support for the next leg higher.

Example: Support to Resistance Flip

1. Price bounces off a level (support) multiple times.
2. Eventually breaks below it.
3. On the retest, that support acts as resistance, and price gets rejected again.

🔁 This flip provides excellent confirmation for entries and is used by both smart money and retail traders.

How to Trade Support and Resistance

✅ Step 1: Identify clear zones where price reversed in the past
✅ Step 2: Wait for price to approach the zone
✅ Step 3: Look for confirmation — candle patterns, order block alignment, or FVGs
✅ Step 4: Place trades with stop-loss slightly beyond the zone
✅ Step 5: Take partial profits as price approaches next level

Tips for Using Support and Resistance Wisely

• Never treat support/resistance as a fixed price, it’s always a zone
• Combine with other tools like FVG, order blocks, and liquidity sweeps
• Use multiple timeframes — higher timeframe S/R levels are stronger
• Watch for the flip — it’s a signal of structural shift

Real-Life Example:

Let’s say XAU/USD is approaching 1910, a former resistance. Price breaks above it during the London session, then comes back to retest it. You observe bullish order block and liquidity sweep just below — time to go long at the flip level.

Final Words

Support and resistance may sound basic, but they remain a core foundation of price action. When you combine S/R levels with other smart money concepts like order blocks, FVG, and liquidity mechanics, you begin to see the full picture of market intent.

Stay disciplined. Don’t rush into every touch. Let price prove itself — and always remember the power of the flip.