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Support & Resistance
Trade price bounces and breakouts at key support and resistance levels
Expected Win Rate:50-60%
Support and resistance trading is a foundational strategy that identifies key price levels where buying or selling pressure has historically been significant. These levels act as barriers that price tends to respect.
Understanding Support & Resistance
Support is a price level where buying pressure overcomes selling pressure, preventing further decline. Resistance is where selling pressure overcomes buying pressure, preventing further advance.
- Support: Floor where price tends to bounce up
- Resistance: Ceiling where price tends to bounce down
- Levels become stronger with more touches
- Broken support becomes resistance and vice versa
Identifying Key Levels
Look for these characteristics when identifying S/R levels:
- Previous swing highs and lows
- Round psychological numbers (1.1000, 1.2000)
- Areas of price congestion
- Fibonacci retracement levels
Trading Bounces
Trade when price approaches and respects a level:
- Wait for price to reach the S/R level
- Look for rejection candles (pin bars, engulfing)
- Enter in the direction of the bounce
- Place stop-loss beyond the level
Trading Breakouts
Trade when price breaks through a level:
- Wait for a strong close beyond the level
- Enter on retest of the broken level
- Volume confirmation adds confidence
- Target the next S/R level
Advantages
- +Easy to understand and identify
- +Works on all timeframes
- +Clear stop-loss placement
- +Can be combined with other strategies
Disadvantages
- -Levels are zones, not exact prices
- -False breakouts are common
- -Requires patience for setups
- -Subjective level identification
Best Suited For
- Beginning traders learning technical analysis
- Traders who prefer visual chart patterns
- Those who like defined risk/reward setups
Practice This Strategy
Test the Support & Resistance strategy risk-free on a demo account
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