Support and resistance aren’t magical concepts—they’re simply price levels where buyers and sellers consistently show up. Support acts as a floor where price stops falling because demand rises, preventing further decline. Resistance works as a ceiling—when price rallies toward it, supply overwhelms demand, halting advances. Think of support as where buyers park their money thinking “this price is too cheap to ignore,” and resistance as where sellers appear thinking “this price is too expensive”.
How Support and Resistance Form
Price doesn’t randomly create these zones. They form through historical price memory and trader psychology. When stock bounces off ₹450 five times over months, professionals and algorithms learn to trade around ₹450. On the sixth test, that level attracts massive orders—ensuring another bounce. This happens because thousands of traders recognize the same level simultaneously.
Support and Resistance Levels: Where price bounces and reverses
Nifty50 currently holds support at 25,500-25,300 with resistance near 25,800. Traders worldwide watch these exact numbers, making them powerful self-fulfilling prophecies.
Trading with Support and Resistance
Range trading captures the easiest profits—buy near support, sell near resistance, repeat. Long-term positions use support as stop-loss placement below the zone, resistance as profit-target territory. Buy a stock at ₹470 with support at ₹450? Place stop-loss at ₹445—just below support—allowing minor fluctuations without stopping out.
The Biggest Trap: False Breakouts
Most traders lose money chasing breakouts that immediately reverse. Price crashes below support with heavy volume—looks like capitulation. Traders panic-sell. Then—suddenly—institutional buyers show up, price rebounds 3% within two candles, trapping those sellers. These false breakouts happen when amateur traders finally surrender, and professionals scalp those stops.
False Breakout: Price breaks support then reverses, trapping traders
Wait for price to close beyond support or resistance—not just touch it. Weak breakouts lack volume; strong ones explode on heavy trading. Combining support-resistance with RSI or moving averages cuts false-signal losses dramatically.
Common Mistakes Killing Accounts
Setting stop-loss too tight triggers on minor wiggle-room, wasting positions. Drawing random lines instead of identifying real bounce points destroys credibility. Ignoring higher timeframes creates conflicting signals—what looks like breakout on 15-minutes charts might contradict daily trends. Missing volume confirmation during breakouts catches traders in whipsaws repeatedly.
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