Support & Resistance

📗 SUPPORT: a price level where demand has historically exceeded supply. Price descends toward this level and 'bounces' upward. Buyers enter en masse at this level — or, more precisely, resting buy orders (limits and stops of shorts) are stacked there and absorb the selling. 📕 RESISTANCE: a price level where supply has historically exceeded demand. Price rises toward this level and gets 'repelled' downward. Sellers enter or take profit at this level — resting sell orders absorb the buying. Why do they work? Three mechanisms, each rooted in real order placement: 1. MEMORY: traders who bought at support in the past and profited remember the level and place buy limits there again. The level becomes a self-fulfilling attractor of resting demand. 2. REGRET: those who missed the bounce the first time wait for the re-test to enter. Unfulfilled demand from the prior touch converts into new buy orders at the same level. 3. STOP LOSS: short traders who are in loss have their buy stops (stop-loss orders) sitting just above support. When price returns, those stops trigger as buy orders — adding fuel to the bounce. The institutional layer: large participants cannot enter their full size at market without moving price against themselves. They accumulate at levels using iceberg/limit orders, and they defend those levels because their average entry sits there. A support that holds is, very often, a level where a large participant is still accumulating; when that participant is filled, the level stops defending and breaks. This is why 'the more times a level is tested, the more likely it is to break' — each test consumes a portion of the defending order. The single most important shift in perspective for a beginner: levels are not lines, they are order clusters. Support is not 'a price'; it is the location of a stack of buy orders. Resistance is the location of a stack of sell orders. When you think in terms of orders rather than lines, the behaviour of price around levels becomes logical instead of mysterious.