Price Action Support/Resistance – What It Is & How to Trade with It

Price Action Support/Resistance – What It Is & How to Trade with It

What is Price Action Support/Resistance?

Price Action Support/Resistance refers to key price levels where buying and selling pressure historically influenced price movements. Unlike traditional indicators, price action trading relies purely on historical price levels and candlestick patterns to identify high-probability trade zones.

• Support: A price area where demand increases, preventing further decline.
• Resistance: A price area where supply increases, capping upward movements.

These levels are often formed by previous swing highs, lows, and consolidation zones.

Key Features of Price Action Support/Resistance

• Pure price-based trading approach without lagging indicators.
• Identifies historical support and resistance areas for trade planning.
• Works across all timeframes and market conditions.

How to Use Price Action Support/Resistance in Forex Trading

1. Reversal Trading Strategy

Traders use Support/Resistance for trend reversal signals:

• Buy when: Price reaches a key support level and forms a bullish price action pattern (e.g., pin bar, engulfing candle).
• Sell when: Price approaches a resistance level and forms a bearish rejection pattern.

2. Breakout Trading Strategy

Price Action Support/Resistance helps confirm breakout trades:

• Buy when: Price breaks above resistance with strong momentum and closes beyond the level.
• Sell when: Price breaks below support, signaling trend continuation.

Confirmation indicators: Volume spikes, retest of the broken level, breakout candle size.

3. Trend Continuation Strategy

Support and Resistance zones act as dynamic trading zones in trends:

• Buy when: Price pulls back to a previous resistance-turned-support and shows bullish continuation.
• Sell when: Price retests a previous support-turned-resistance and fails to break higher.

4. Price Action Support/Resistance with Candlestick Patterns

Combining Support/Resistance with candlestick confirmations increases accuracy:

• Bullish confirmation: Pin bars, engulfing candles, hammer formations at support.
• Bearish confirmation: Shooting stars, evening stars, and bearish engulfing at resistance.

Pros and Cons of Using Price Action Support/Resistance

✅ Pros:

• Does not rely on lagging indicators.
• Works in all market conditions (trending, ranging, and breakout scenarios).
• Provides clear entry and exit levels based on past price action.

❌ Cons:

• Requires manual analysis and interpretation.
• Can be subjective, depending on the trader’s ability to identify key levels.

Final Thoughts

Price Action Support/Resistance is a core trading concept that helps traders analyze market structure, confirm key levels, and optimize trade entries. When combined with candlestick patterns and breakout strategies, Price Action Support/Resistance enhances trade accuracy and decision-making.