PaperLesson: Support & Resistance

Support (The Bottom)

Support is the level where a falling price tends to stop and bounce back up. As the price drops, it becomes more attractive to buyers. Eventually, there are more people wanting to buy than sell, which creates a "floor/bottom."

Think of it as a "Buy Zone." Traders look for the price to hit this level and start moving upward again.

Resistance (The Top)

Resistance is the level where a rising price tends to stop and dip back down. As the price rises, people who bought earlier start selling to take their profits. Eventually, there are more people wanting to sell than buy, which creates a "ceiling."

Think of it as a "Sell Zone." Traders expect the price to struggle to get higher than this point.

One of the most important concepts in trading is that these levels are not permanent. When a price finally breaks through a "ceiling," that ceiling often becomes the new "floor" and vice versa.

How to Trade it:

Support and resistance trades are among the most straightforward and effective setups on a price chart. Think of Support as a floor and Resistance as a ceiling; these are key zones where price is likely to either hold its ground or reject.

You look to enter a Call (Long) position at support and ride the price back up toward the next resistance level. At Resistance, you look to enter a Put (Short) position to ride the price back down toward the next support level.

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