How to Read Support and Resistance Levels
What is support?
Support is a price level where buyers step in and stop a decline. Levels that reacted several times before attract attention when retested.
What is resistance?
Resistance is a level where sellers cap a rally. A broken resistance often becomes support, and a broken support often becomes resistance.
How levels are found
Previous highs and lows, high-volume zones, moving averages and Fibonacci retracements are candidates. ATR widens levels according to volatility.
Confirming a breakout
A close beyond the level, rising volume and a successful retest count as confirmation. Unconfirmed breakouts are often false.
Order clustering at levels
A New York Fed study found that exchange rate moves can accelerate unusually once rates reach levels where stop-loss orders are documented to cluster[1]. Sharp, short moves just beyond obvious levels are therefore possible; see the stop-clustering guide.
Risk management
Define a stop-loss and a risk/reward ratio before every entry. This page is educational, not investment advice.
Frequently asked questions
- Why do sharp, short moves appear just beyond obvious levels?
- A New York Fed study found that exchange rate moves can accelerate unusually once rates reach levels where stop-loss orders are documented to cluster, so sharp, short moves just beyond obvious levels are possible[1].
Related guides
Sources
- C. L. Osler. Stop-Loss Orders and Price Cascades in Currency Markets. Federal Reserve Bank of New York, Staff Report No. 150, 2002. Accessed: 2026-10-22.