Welcome to the Advanced Module of the PROP365 Academy. In this lesson, we focus on stock support and resistance—an essential concept for traders who rely on price action. You’ll learn how these levels form, how to trade them effectively, and why they’re central to any profitable strategy.
Let’s clarify what is support and resistance in stock terms. These are horizontal price levels on a chart where buying or selling pressure tends to appear. Support is where price tends to stop falling and reverse upward, while resistance is where price tends to stop rising and reverse downward.
These levels are drawn by connecting swing highs or swing lows, creating horizontal zones that price frequently respects. When price reverses direction at these zones, they gain significance. If price breaks through resistance and revisits it, that level may flip and act as support — and vice versa.
Trading with Support and Resistance in the Stock Market
Understanding what is support and resistance in stock market trading gives you a powerful edge. These levels often define trading ranges and trend retracements:
- In an uptrend, old swing highs can act as new support.
- In a downtrend, old swing lows often become new resistance.
Price frequently retests these areas before continuing in the trend’s direction, making them ideal entry zones for traders who know what to look for.
Price Action Strategies
This levels are high-probability zones to trade price action signals. Common entry strategies include:
- Pin bar signals: These show strong rejection from a level.
- Fakie setups: False breakouts followed by a strong reversal.
- Inside bars: Indecision that often resolves with a breakout in the direction of the trend.
Example:
- A bearish fakie off a resistance level signals strong rejection and downside continuation.
- Two pin bar signals forming at support in an uptrend suggest the trend is resuming upward.
- A previous swing high flips into a support level after a breakout — look for a bullish pin bar to rejoin the uptrend.
Each setup uses the key level as a confluent area, increasing the probability of success and providing a logical place to position stop-loss orders.
Tips for Drawing Stock Support and Resistance Levels
- Focus on key daily chart levels, not every small fluctuation.
- Lines won’t always touch exact highs or lows—this is a skill and an art, not a science.
- Only trade signals that occur at meaningful support or resistance zones.
If your signal isn't forming at a critical level, it's often better to skip the trade.
Summary
Stock support and resistance levels are the backbone of price action trading. They offer structure, timing, and a logical risk-reward foundation for every trade. Knowing what is support and resistance in stock helps traders spot high-probability setups and avoid noise.
Want to build your strategy around real market behavior? Start applying what you’ve learned today with PROP365 — where your trading education meets real capital opportunities.
