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Support and Resistance Bounce

Buy near a price level where buyers have stepped in before (support), with a tight stop just below it. A classic way to learn reading charts and placing logical stops.

MarketsStocks, Forex, Crypto
StyleSwing trading
Timeframe4-hour or Daily chart
LevelBeginner
Slav: "So the price bounces like a ball?" Max: "Sometimes. And sometimes the floor breaks, which is why we bring a stop loss, not a helmet."

The idea

Support is a price area where the price has stopped falling and turned up several times, because buyers were willing to buy there. Resistance is an area where the price has stopped rising several times, because sellers appeared.

The strategy buys near support (or sells near resistance), expecting the level to hold again, with a stop just beyond it in case it doesn't.

When it works best

  • Ranging markets with clear, repeated turning points
  • Levels that have been tested two or three times

When it fails

  • Strong trends that break through levels
  • Big news events
  • Levels drawn "to fit" what you want to see

Entry rules (buying at support)

  1. Mark a support zone where price has turned up at least twice.
  2. Wait for price to come back into the zone.
  3. Wait for a sign that buyers are stepping in, for example a bullish candle closing back up from the zone.
  4. Enter after that candle closes.

Stop loss

Just below the support zone, with a small buffer, since levels are zones, not exact lines.

Exit / take profit

Near the next resistance zone. Only take the trade if the distance to resistance is at least about 2× the distance to your stop.

Example (fictional)

EUR/XYZ (a made-up pair) has bounced from 1.2000 three times. Price returns to 1.2005 and forms a strong bullish candle. Slav buys at 1.2030 with a stop at 1.1980 (50 pips of risk). Resistance is at 1.2150 (120 pips away, a 1 : 2.4 risk/reward). Price reaches 1.2145 and he exits. Next month the same support breaks and his stop is hit, which is a normal, planned loss.

Pros

  • Logical places for stops and targets
  • Teaches you to read price behaviour
  • Works on any market and timeframe

Cons

  • Drawing levels is partly subjective
  • Levels eventually break
  • Easy to see levels everywhere (confirmation bias)

Common mistakes

  • Buying support in a strong downtrend
  • Placing the stop exactly on the level, where it's easily hit
  • Taking trades with a poor risk/reward because "it's at support"

Checklist before the trade

  • The level was tested at least twice
  • There's a confirmation candle
  • Reward is at least 2× risk
  • Stop is below the zone, not on the line
Educational example, not a recommendation. Test any strategy on a demo account first, use the position size calculator, and record every trade in your journal.
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