Support

Support is an area on a chart where buying has previously been strong enough to halt a decline. The reasoning is that buyers who missed the last bounce may be waiting there, and sellers may be reluctant to sell at prices that have recently proved cheap. Support is the mirror image of resistance.

Like resistance, support is best treated as a zone rather than a precise line. Wicks overshoot, different brokers show slightly different lows, and the same level looks different on a 5-minute and a daily chart.

How traders identify it

• Previous swing lows, especially ones tested more than once.
• Round numbers, such as 1.0500 or 1.0000 on EUR/USD.
• Old resistance that has been broken, which often acts as support afterwards.
• Rising moving averages or trend lines in an uptrend.

Example

Illustrative figures: AUD/USD falls to 0.6500 in March, to 0.6508 in May and to 0.6495 in July, bouncing each time. A trader might mark a support zone of roughly 0.6490 to 0.6510. Someone looking to buy near that zone would typically place a stop-loss below it, since a clear break would undermine the reason for the trade.

Common misconceptions

• "The more often tested, the stronger." Repeated tests can also mean buyers are being used up, and many traders place stops just below obvious levels, which can fuel a sharp break when they are triggered.
• Support is not a prediction. It is a place to pay attention and plan, not a reason to expect a bounce.

See our guide to support and resistance, and multiple timeframe analysis for how levels on higher timeframes tend to carry more weight.