Simple definition
Support and resistance are price levels where an investment has historically tended to stop falling or stop rising. Support is a floor where buyers have often stepped in; resistance is a ceiling where selling has often picked up. Think of a ball bouncing in a room: the floor tends to push it back up, the ceiling tends to knock it back down.
Why it matters
Technical traders watch these levels to plan when they might buy or sell, so understanding them helps you read charts others use. But support and resistance describe past tendencies, not rules the price must obey. A level can hold for a while and then break without warning, so treat them cautiously.
Real-life example
Suppose a stock keeps bouncing up near $50 but stalls whenever it nears $60. A chart reader might call $50 support and $60 resistance and trade around those zones. The pattern may hold for a stretch, then snap — charts describe how a price behaved before, not how it's guaranteed to behave next.
Common mistakes
- Treating support and resistance as guaranteed floors and ceilings rather than tendencies.
- Assuming a level that held in the past will always hold in the future.
- Trading on these levels while ignoring the actual health of the business.
- Overtrading around every level and piling up fees and taxes.
Pro tips
- Read these levels as tendencies drawn from the past, not promises about the future.
- Expect that any support or resistance level can eventually break.
- Consider pairing chart levels with a look at the company's fundamentals.
- Remember most long-term investors never trade around these lines at all.
Related Money Dictionary terms
- Technical AnalysisStudying past price and volume patterns on charts to try to predict where an investment might move next.
- Moving AverageA line that smooths out an investment's price over a set period to reveal its underlying trend.
- VolatilityHow sharply and often an investment's price swings up and down over a given period.
- StockA share of ownership in a company that you can buy and sell, giving you a small stake in its profits and growth.
- Market TimingTrying to buy and sell based on predicting market moves, a strategy that is difficult to get right consistently.
- Trading VolumeThe number of shares of an investment that change hands during a period, signaling how actively it trades.
Frequently asked questions
What's the difference between support and resistance?
Support is a price level where an investment has repeatedly stopped falling and bounced back up, as if buyers reliably step in there. Resistance is the opposite: a level where it has repeatedly stopped rising and turned back down. One acts like a floor beneath the price, the other like a ceiling above it.
Do support and resistance levels always hold?
No. They're tendencies based on how a price behaved before, not rules it must follow. A support level can break and the price can keep falling, and resistance can give way and let the price climb higher. That's why traders treat these levels as clues to watch, never as guarantees.
What happens when a level breaks?
When a price pushes decisively through support or resistance, traders often say the level has broken, and some watch for the price to keep moving in that direction. A broken resistance level can even start acting as new support, and vice versa. Still, these are observed tendencies, not certainties about the next move.
Knowing what Support and Resistance means is knowledge — the first half. A brick gets placed when you act on it: before trading around any chart level, note why the underlying business backs the decision as well.
Sources & references
More in Investing
Plain-English education — not personalized legal, tax, or investment advice.