Support and Resistance as Areas, Not Exact Prices
Support and resistance are best treated as zones of repeated reaction where orders have historically clustered, not as single “magic” prices. On real charts, price rarely turns on a perfect tick; it often probes a level, wicks through it, and then reacts. Thinking in zones helps you avoid two common mistakes: (1) assuming a level is broken because of a small overshoot, and (2) placing entries/stops so tightly that normal volatility knocks you out.
Support zone: an area where declines repeatedly stall and buying pressure appears. Resistance zone: an area where advances repeatedly stall and selling pressure appears. In supply/demand language, support often aligns with a demand zone (aggressive buying previously absorbed selling), and resistance aligns with a supply zone (aggressive selling previously absorbed buying).
What a “reaction” looks like
- Rejection wicks: price trades into the area, then closes away from it.
- Sharp displacement: a strong move away from the area over a few candles.
- Repeated stalling: multiple attempts to push through fail, creating a visible ceiling/floor.
How to Locate Candidate Levels
You are looking for places where the market previously made decisions: turning points, pauses, and breakouts. Use these three sources to find candidates, then later convert them into zones.
1) Swing highs and swing lows
Swing points are natural reference areas because they mark where one side temporarily “won.”
- Swing low → candidate support/demand area.
- Swing high → candidate resistance/supply area.
Practical method: identify the most visually obvious turning points first (the ones you can see without zooming in). If you must “hunt” for a level, it is usually not actionable.
Continue in our app.
You can listen to the audiobook with the screen off, receive a free certificate for this course, and also have access to 5,000 other free online courses.
Or continue reading below...
Download the app
2) Consolidation ranges (bases)
Consolidations are zones where price moved sideways and traded heavily before leaving. These areas often act as future reaction zones because many participants have positions or unfilled orders there.
- Range low often behaves as support.
- Range high often behaves as resistance.
- Middle of the range is usually less actionable unless repeatedly respected.
In supply/demand terms, the consolidation is the “base.” When price leaves the base with strong momentum, the base becomes a candidate zone for a future retest.
3) Prior breakout points (decision levels)
Breakouts and breakdowns highlight where price transitioned from balance to imbalance. The breakout area often becomes important later because traders anchor to it.
- Breakout above resistance: the breakout area can later act as support (role reversal).
- Breakdown below support: the breakdown area can later act as resistance (role reversal).
Focus on breakouts that show clear displacement (a strong move away). Weak, choppy breakouts tend to produce weaker zones.
Convert Lines into Zones (Choosing a Reasonable Width)
After you identify a candidate level, convert it from a single line into a zone that reflects how price actually behaved around it. A zone should be wide enough to include typical overshoots, but narrow enough to remain actionable.
Zone-drawing techniques
- Wick-to-body method: if the turning point shows long wicks, include the wick extremes in the zone. If closes cluster tightly, anchor the zone more around the closes.
- Base method (supply/demand): mark the consolidation “base” that preceded a sharp move away. The zone spans the base’s high-to-low (or the most traded portion of it).
- Cluster method: when multiple candles repeatedly turn in the same area, draw the zone to cover the cluster of highs/lows rather than a single candle.
Volatility-based width (practical rule)
Zone width should scale with volatility. A simple approach is to use the instrument’s typical range on your execution timeframe.
- Estimate average candle range visually, or use an ATR indicator if available.
- Set zone thickness to roughly 0.5× to 1.5× the typical candle range on that timeframe (wider for more volatile markets).
Example (conceptual): if a market commonly moves 1.0 unit per candle on your execution timeframe, a zone thickness of ~0.5–1.5 units often captures normal probing without making the zone too broad.
Keep zones “clean”
Zones should be easy to explain: “Price reacted here multiple times,” or “This base launched a strong move.” If you need multiple overlapping micro-zones, you likely zoomed in too far or used too low a timeframe for the initial marking.
Role Reversal: When Support Becomes Resistance (and Vice Versa)
Role reversal is a common behavior: once a zone is broken with conviction, the market often retests it from the other side.
- Old resistance → new support: price breaks above a ceiling, then later pulls back to that area and holds.
- Old support → new resistance: price breaks below a floor, then later rallies into that area and rejects.
How to validate role reversal: look for a clear break (not just a brief wick) and then a retest that shows rejection (wicks, strong closes away, or a sharp move away). If price drifts through the area with little reaction, the role reversal is weak or invalid.
Confluence: Round Numbers and Other “Magnet” Areas
Some zones matter more because they align with widely watched reference points. One common form of confluence is round numbers (psychological levels), where traders naturally cluster orders.
- Examples: 100, 1,000, 10,000; or 1.2000 in FX-style quoting.
- Round numbers are rarely sufficient alone, but they can strengthen a zone when they overlap with a swing point, base, or breakout area.
Practical use: if your zone is near a round number, consider slightly widening the zone to include the round number if it sits within normal volatility. If the round number is far from the reaction area, treat it as a separate reference rather than forcing it into the same zone.
Judging Level Strength (Quality Filters)
Not all zones are equal. Use three primary filters to judge whether a zone is likely to be actionable.
1) Number of touches (with a nuance)
- More touches can confirm that the market recognizes the area.
- But: too many touches can also mean the zone is being “used up” as orders get filled, making future reactions weaker.
Practical guideline: prefer zones with 2–4 clear reactions over zones that have been tapped repeatedly with diminishing response.
2) Recency
More recent zones tend to be more relevant because market participants and positioning change over time.
- Recent + clear reaction often beats old + faint reaction.
- Older zones can still matter if they were major turning points or launched strong moves.
3) Reaction size (displacement away)
The stronger the move away from the zone, the more it suggests imbalance (aggressive buying/selling) and potential unfilled orders.
- Strong: sharp move away in a few candles, large bodies, minimal overlap.
- Weak: slow drift away, choppy overlap, immediate re-entry into the zone.
Additional practical checks
- Cleanliness: zones that are respected with clear rejections are easier to trade than messy, overlapping areas.
- Space to the next zone: if the next opposing zone is very close, your reward potential may be limited.
A Structured Process You Can Repeat
Step 1: Mark higher-timeframe zones first
Start by identifying the most important zones on a higher timeframe than the one you execute on. The goal is to capture the “big” decision areas that can dominate price behavior.
- Mark major swing highs/lows.
- Mark obvious consolidation ranges that preceded strong moves.
- Mark major breakout/breakdown regions with clear displacement.
Output of Step 1: a small set of broad, high-importance zones that frame where you want to pay attention.
Step 2: Refine on the execution timeframe
Drop to your execution timeframe and refine the higher-timeframe zones into more actionable boundaries.
- Tighten the zone to the most respected portion (cluster of closes or the base).
- Adjust width to match volatility on the execution timeframe.
- If the higher-timeframe zone is very wide, identify the sub-area where reactions were most consistent.
Rule: refinement should not change the story. It should clarify it.
Step 3: Plan invalidation points beyond the zone
A zone is useful only if you can define what “wrong” looks like. Invalidation is typically placed beyond the zone, not inside it, to allow for normal probing.
- For a demand/support zone: invalidation is usually below the zone’s lower boundary (plus a small buffer for volatility).
- For a supply/resistance zone: invalidation is usually above the zone’s upper boundary (plus a small buffer).
Practical buffer: use a fraction of typical candle range (or ATR) so your invalidation is not triggered by routine noise.
Step 4: Avoid clutter—limit to the most actionable levels
Too many zones create analysis paralysis and conflicting signals. Your chart should highlight where you will make decisions, not every historical turning point.
- Keep the top 2–4 zones above and below current price that are most likely to matter soon.
- Prefer zones with strong reactions, good recency, and clear structure.
- Remove zones that price has churned through repeatedly with little response.
Worked Examples (How You’d Draw It)
Example A: Swing low support → demand zone
- Find a clear swing low where price reversed upward.
- Note the candles at the turning point: if there are long lower wicks, include them in the lower boundary.
- Draw the zone from the lowest wick in the cluster up to the area where closes began to hold.
- Check reaction size: did price move away sharply? If yes, prioritize the zone.
- Plan invalidation below the zone (plus volatility buffer).
Example B: Consolidation base → supply zone after a drop
- Identify a sideways base followed by a strong bearish move.
- Draw the zone around the base (the consolidation range) rather than the single candle that broke down.
- When price revisits, watch for rejection near the upper portion of the base (common in supply retests).
- Invalidation goes above the base high (plus buffer).
Example C: Breakout point → role reversal support
- Mark the prior resistance area that price broke above with strong displacement.
- Convert it into a zone that covers the breakout region (often the last consolidation before the push).
- On retest, treat the zone as potential support; look for rejection and a move away.
- If price closes and holds below the zone with ease, role reversal has likely failed.
Common Mistakes to Avoid
- Drawing razor-thin lines: leads to false “breaks” and premature stop-outs.
- Using every minor pivot: creates clutter and reduces decision quality.
- Ignoring volatility: a zone width that works in a calm market may fail in a volatile one.
- Forcing confluence: round numbers help only when they align naturally with real reactions.
- No invalidation plan: without a clear “wrong” point, zones become vague opinions rather than tradable structure.
