The concept of support and resistance is one of the most powerful tools available to a trader. Support, or a support level, can be thought of as a floor below which the price has refused to fall in the past. It is a zone where demand for a given asset is so strong that it outweighs supply and halts the price’s decline.

Resistance, or a resistance level, acts as an invisible ceiling. It is a price level where sellers are aggressive enough to halt the price’s rise and force it to reverse downward. These levels do not arise randomly but are the result of the collective memory of market participants. Traders remember where the price was cheap or expensive in the past, and they react with increased activity at these levels.

A very important principle is the so-called polarity of levels. When the price breaks through strong resistance on the upside, this level is often retested from the opposite side and turns into new support. This process confirms the strength of the new trend and provides traders with logical entry points.

However, you should not view support and resistance levels as precise mathematical lines, but rather as broader price zones. The market tends to test these levels and sometimes slightly overshoot them before actually reversing. Identifying these zones on the chart allows you to understand where the major players’ areas of interest lie and where the probability of a trend reversal is highest. It’s a map that shows you where the pitfalls are and where the safe havens for your capital are.