What are support and resistance lines?
Support and resistance are the most basic and powerful tools in chart analysis. Although it is simpler than any other indicator, understanding it well can help you beat many traders.
- Support line: Horizontal line where the price stops falling and rebounds
- Resistance Line: Horizontal line where price stops rising and falls
Reasons why support and resistance lines are formed
Psychological memory
Market participants remember what prices mattered in the past.
Example: If BTC bounces strongly from $90,000
→ The next time it approaches $90,000, buy orders will flock again.
→ $90,000 acts as support
Round number psychology
Natural support/resistance is formed at **round numbers (multiples of 10) such as $90,000, $95,000, and $100,000.
Past high and low points
Very often, the highs and lows of the previous cycle act as future support/resistance.
How to find strong support and resistance lines
Criteria 1: Number of contacts
| Number of contacts | Reliability |
|---|---|
| 1st time | ⭐ Weak |
| Episode 2 | ⭐⭐⭐ Medium |
| 3 times+ | ⭐⭐⭐⭐⭐ Powerful |
The more times you test a level with the same price, the more reliable that level becomes.
Criteria 2: Volume
The more volume at a support/resistance level, the stronger the level.
Through the Volume Profile indicator
You can visually check the trading volume in a specific price range
Criteria 3: Time
Older levels are stronger. The low point from a year ago is stronger support than the low point from a week ago.
Criterion 4: Timeframe
| Timeframe | Support/Resistance Strength |
|---|---|
| Jubong | ⭐⭐⭐⭐⭐ Most powerful |
| daily salary | ⭐⭐⭐⭐ |
| 4 hour bar | ⭐⭐⭐ |
| 1 hour bar | ⭐⭐ |
The upper timeframe levels are much stronger than the lower timeframe levels.
Role Reversal
One of the most important principles of support/resistance:
If the past resistance line is broken → Switch to a new support line If the past support line is broken → Switch to a new resistance line
Example:
BTC $90,000 acts as resistance → After breaking through
$90,000 now acts as a support line → buy zone in case of correction
Understanding this principle allows you to predict which past high points on the chart will become future support levels.
Futures trading strategy using support and resistance
Strategy 1: Long Support Bounce
Setup:
1. Confirm strong support line (3 times + contact, daily basis)
2. Price approaches support line
3. Wait for candle reversal signal (hammer type, doji, rising hold type)
4. Enter long after confirming the next bar
Entry: candle pattern completion next candle open
Stop loss: 1-2% below support
Goal: To the next resistance level
Strategy 2: Following the trend of breaking the resistance line (Breakout)
Setup:
1. Check the resistance line tested 3 times+
2. Breaking through the resistance line with a strong candle + explosive trading volume
3. Breakout and enter the next bar opening or
4. ‘Enter after confirmation of retracement’ (safety): Go long at the old resistance line (=new support line) when adjusting after breaking through.
Stop Loss: Below new support line
Goal: Increase additional height by previous level (measured movement)
Strategy 3: Short after the resistance line fails (Failed Breakout)
Setup:
1. Multiple blockages at the resistance line
2. It rises strongly this time and reaches the resistance line.
3. Shooting Star and Evening Star appear at the resistance line.
Entry: Completion of pattern Next bar
Stop loss: 1% above resistance
Target: Just below the support line
Practical tips for drawing support and resistance levels
- Simply: Drawing lines at all high and low points is noise. Show only distinct levels
- To zone: Set to 5-10 dollar zone, not the exact 1st line.
- Intensity display: Distinguish between strong and weak levels by color or thickness.
- Regular update: Chart updated when new highs and lows occur
Related guides
- Fibonacci retracement →
- Use of Bollinger Band support/resistance →
- Support rebound + hammer type combination →
- Trading volume profile →
- Liquidation price calculator →