Support and Resistance Trading: The Foundation
How to trade support and resistance levels: identification, entry at level tests, breakout vs bounce decisions.
What actually is support/resistance
A price level is "support" when demand has previously outpaced supply there multiple times, creating a price floor. "Resistance" is the inverse — previous supply overwhelms demand. These levels matter because market memory is real: traders remember a price they bought at and will buy it again, traders short there again. Levels that have been tested 3+ times without breaking are the strongest.
Trading the level
Two plays at any level: bounce (fade the level) or break (trade the breakout). Pre-level: look for price approaching with decreasing momentum — high-probability bounce. Post-break: look for a retest of the broken level as the opposite role (old resistance → new support). Both plays work; the trick is not to do both simultaneously.
Level selection
Use the highest timeframe you trade for level identification. Daily levels are stronger than 1h levels, stronger than 5m levels. The more timeframes a level shows up on, the stronger it is. Round numbers (100, 200, 4500 on ES) have psychological significance — don't ignore them even if they don't show up on the chart explicitly.