What support and resistance are

The observation is a record, not a force 

What the chart shows there is narrow and factual. On several separate occasions, at around one price, the direction of travel changed. Between those occasions price moved freely over a much wider range, so the recurrence is not an artefact of the instrument having nowhere else to go. That area of the vertical axis coincided with a change of direction more than once, and the chart records the coincidence without explaining it.

Traders conventionally name the two cases separately. An area below the current price, where earlier moves down turned back up, is called support. An area above the current price, where earlier moves up turned back down, is called resistance. The two words describe the same kind of record seen from opposite sides, and which name applies to a given area depends only on where price happens to be sitting at the moment somebody looks.

Both words are metaphors, and the metaphor does more work than the evidence behind it supports. Support suggests a floor with material properties, something underneath price bearing weight. There is no floor. There is a set of past transactions at similar prices, and a mark drawn across the chart to record where they happened. Whether that mark is worth drawing is what the rest of this lesson is about, and it is not settled by the fact that it can be drawn.

Why activity clusters at some prices 

Three explanations circulate, they are not mutually exclusive, and none of them is visible on a price chart. Each carries its own objection, and the objections are why no one of them has displaced the others.

• Resting orders. Instructions waiting to execute at a stated price accumulate at prices that are easy to state, which in practice means round figures and previous extremes. Where enough rest at similar prices, arriving flow is absorbed there rather than moving through. The objection is one of observation: no retail chart reader sees the aggregate of resting instructions across every venue an instrument trades on, so this account is inferred from the price record it is being used to explain.
• Reference points. Participants who transacted near a price refer back to it afterwards, and behavioural research describes a general tendency to anchor judgements to a salient earlier figure. The objection is that this describes a tendency without measuring one, and cannot say which of the thousands of prices in an instrument's history became salient, except by pointing at the ones where a turn later happened.
• Self reference. Many chart readers draw the same marks from the same widely visible turns, so orders cluster at a price because the mark was drawn there. The objection is circularity: if drawing were sufficient, every drawn mark would be followed by a turn, and marks are followed by nothing routinely enough that no version of this account survives without exceptions.

The practical position is that the cluster is observable and its cause is not. Nobody working from price alone sees why the turns happened, and confidence in a mark is often confidence in whichever of the three stories was told alongside it.

Two ways a level gets located 

The first method works from swing points. Swing highs and swing lows are already mechanical, so a reader takes the swings of one kind and looks for two or more that occurred at a comparable price on separate occasions. The area those swings occupy becomes the mark, and everything carried over from the previous lesson travels with it: the swings depend on the confirmation setting and the timeframe used to find them, so the level inherits both.

The second method works from congestion. Where price spent a long stretch of bars moving sideways within a narrow band, the whole band is marked rather than any single turning point in it, and its upper and lower boundaries become the outer limits of the area. This produces a wider mark than the swing method and a differently sourced one, because a congestion area is where a large number of transactions took place, while a swing extreme is often the opposite, a price touched briefly by very few.

Traditions divide over which method to prefer, and the division is genuine rather than technical. One holds that the volume of trading inside a congestion area is what makes it consequential, so the band matters and the spike out of it does not. The other holds that the extreme is where the balance of pressure actually changed, so the extreme is the mark and the band is context. Applied to one chart the two methods produce different areas at different prices, and no test on the chart itself decides between them.

A level is an area, not a price 

The turns almost never occur at one figure. They occur near one figure, scattered across a span, and the span is not noise to be tidied away. It is the measurement. A mark stated as a single price has had a decision hidden inside it about which of the touches to privilege and which to treat as an overshoot, and that decision is rarely stated by whoever made it.

The rows show what a single figure discards. The four occasions did not agree with each other to better than that width, so a statement of the form the level is at one hundred and two carries an error of that size, silently. The convention that follows is to draw the mark as a band rather than a line, which is what the word zone records: a region with a top and a bottom, both as much a part of the observation as the middle is.

The width also determines something else that is often quoted as if it were a fact about the market, which is how many times an area has been touched. A touch has to be defined before it can be counted, and defining it requires a tolerance, and the tolerance is chosen by whoever is counting.

So a count of touches is a setting reported as an observation. This matters more than it first appears, because the number of touches is the figure most often cited when one area is described as more consequential than another, and it can be moved by widening a band that nobody else can see.

What the presence of a level does not tell anyone 

The mark on the chart is a summary of what has already happened. Four things it does not contain are worth stating flatly, because most of the trouble around this topic comes from reading one of them into it.

1. It does not say that price will change direction there again. Price passing straight through an area that produced several earlier turns is an ordinary occurrence, not an anomaly requiring an explanation.
2. It does not say when price will reach the area, if it reaches it at all. An area can sit unvisited for the entire life of a chart.
3. It does not say which side price will eventually leave from, and the record of earlier turns carries no information about the direction of a departure that has not happened.
4. It does not say how far a change of direction would extend if one occurred. Distance is a separate question that the observation is silent on.

This page publishes no figure for how often price turns at a previously marked area, and the omission is deliberate rather than an oversight. Such a figure would depend entirely on three settings chosen before any counting began: what counts as a level, what counts as a touch, and what counts as holding rather than breaking. Move any one of them and the figure moves with it. A percentage quoted anywhere for this has had those three choices made for it by whoever quoted it, usually without saying which.

Breaks, and what the vocabulary does afterwards 

Sooner or later price trades through an area and keeps going. That event is conventionally called a break, and there is no agreed definition of when it has occurred. Some readers treat any trade beyond the far boundary as the break. Some require a bar to close beyond it, which excludes a brief overshoot inside a bar. Some require a close beyond by a stated distance, or on a higher timeframe. On one instrument over one period these definitions return different dates for the same event, and one frequently returns no break where another returns one.

A widely repeated convention holds that a broken resistance area is relabelled as support afterwards, and a broken support area as resistance, on the reasoning that participants who transacted around it now stand on the other side of it. The convention is easy to state and difficult to test, because it survives both outcomes. Where price returns and turns, the return is cited as confirmation of the relabelling. Where price returns and continues straight through, the area is described as having failed and is quietly removed from the chart. A rule confirmed by one outcome and never disconfirmed by the other is a description of the past wearing the grammar of a prediction.

The same asymmetry produces the redrawing habit. When price moves through an area and comes back, the mark is commonly moved to wherever the most recent turns occurred, which means the chart in front of a reader almost always displays areas that recently coincided with turns. That is a property of the redrawing, not evidence about the areas.

Where practitioners disagree 

The first disagreement is about which prices define the boundaries. One tradition uses the extremes reached during each bar, on the reasoning that those are prices at which the instrument genuinely traded. Another uses closing prices only, on the reasoning that a brief extreme can represent a single transaction nothing confirmed, while a close is where trading in that period came to rest. The two produce areas of different widths from identical data, and the choice is a convention rather than a finding.

The second is about touch counts, and the two accounts contradict each other directly. One tradition treats a greater number of touches as evidence that an area is widely watched, and therefore as making the mark more consequential. Another treats each touch as consuming the resting instructions that produced the earlier turns, and therefore describes a much tested area as being progressively emptied by the testing. The same observation supports both readings, they point in opposite directions, and no evidence this page can verify decides between them.

The third is about whether the observation carries any content beyond arithmetic. The sceptical account is that any series moving within a range revisits prices near its extremes repeatedly, so recurrences appear in randomly generated series no participant ever looked at, and a marked chart of one is not visibly different from a marked chart of a real instrument. Practitioners answer that participants and their resting instructions are real whatever a simulation produces. Both positions are held by people who read charts for a living, and the honest statement is that this is a description of past activity whose predictive content is disputed rather than established.