Support and resistance
Support is a price level where falling prices have previously stopped or turned up. Resistance is a level where rising prices have previously stopped or turned down.
How Support and resistance is calculated
There is no single formula. Common methods mark swing highs and swing lows (a bar whose high is the highest of the bars on both sides), round numbers, or the previous day's high and low. A level is more often drawn as a zone of a few ticks or an ATR fraction than as one exact price.
How it is read
Traders watch for price to hold at a level or to close beyond it. A level that has been touched several times is read as stronger, and a broken level is said to swap roles.
Common mistakes
- Drawing levels after the fact. With hindsight a line can be placed through almost any turning point.
- Using a razor-thin line. Price rarely turns at an exact number.
- Counting each touch as extra proof. Touches also wear a level out.
Test it yourself
What Tickfloor tested
Tickfloor's research desk has backtested 678 strategies, net of modelled trading costs. After correcting for the 761 tests run, 0 passed. That does not prove no strategy works. These are historical diagnostics, not validation under Testing Standard v2: the backtest harness predates that standard and has not been re-run to meet it.
Lessons that cover it
Related concepts
General information only. It doesn't consider your objectives, finances or needs. Tickfloor holds no financial services licence and never places trades.