Your Cart is Empty
Support & Resistance: The Simplest Market Structure I Use
If I had to strip a chart down to one of the most useful pieces of structure I use, support and resistance would be near the top of the list.
They help answer a basic question: where have buyers and sellers historically shown up?
Support is an area where buying has been strong enough to slow or stop a decline. Resistance is the opposite: an area where selling has historically been strong enough to slow or stop a rise. Neither level is a promise. They are places I want to watch.
A stock can spend a long time moving between those two areas. If the range is clear, I may look for an entry nearer support and an exit nearer resistance. I am trying to buy closer to the lower part of the established range and sell closer to the upper part, while knowing support can still fail.
When resistance breaks, the structure changes. That old resistance can become new support. I do not necessarily want to chase the first spike; I often want to see whether price can hold above the old level. If it does, that can create a cleaner breakout setup.
The same thing happens in reverse. If support fails, the old support area can become resistance. If I am long, I want to respect that information rather than pretending the original structure is still intact.
Support and resistance are not always horizontal either. In a rising trend, both can move higher and create a channel. If the stock keeps making higher highs and higher lows inside it, I can follow the move until the structure changes.
What I like most is that these levels make risk more concrete. They give me logical places to think about entry, failure and potential reward without covering the chart in indicators.
Once you start seeing those levels, charts tend to make a lot more sense.
Read The Market Is a Language, Swing Trading vs. Breakout Trading, and How I Think About Trading.
Continue exploring
This article is part of my Trading & Markets authority series. Continue with Capital Markets hub, Position Size, Risk & the Anxiety Test, The First Breakout: How I Look for Emerging Momentum and Plan the Trade Before You Enter It.
This article is educational only and not investment advice.
Leave a comment
Comments will be approved before showing up.
Continue Exploring
Why Buying Is Easy and Selling Is Hard
Buying a stock is often the easy part. Selling forces you to deal with uncertainty, FOMO, loss aversion and the possibility that the move continues without you. Here’s how I think about it.
Read More
Higher Highs & Higher Lows: How I Ride a Trend Until It Breaks
A simple way I read an uptrend: follow the higher highs and higher lows, understand the channel, and stay with the move until the structure tells me it has changed.
Read More
The Lifecycle of a Small-Cap Public Company
Small public companies move through recognizable phases: formation, financing, execution, growth, reinvention and sometimes failure. Understanding the phase changes how I see the opportunity.
Read More
Plan the Trade Before You Enter It
Before I enter a trade, I want to know the setup, entry, target, stop, thesis and risk/reward. Planning those decisions before money is on the line helps me trade with more discipline.
Read More