SUPPORT &
RESISTANCE EXPLAINED

What Support and Resistance Actually Are

Support and resistance are not lines on a chart — they are price zones where significant buying or selling activity previously occurred, creating a memory in the market. When price returns to these zones, the participants who acted there previously have a reason to act again: a trader who bought at $90,000 will defend that level if price returns there. A trader who sold at $97,000 will sell again if price recovers to that level. These collective decisions create self-fulfilling levels.

Systematic frameworks identify these levels not by drawing horizontal lines at "obvious" round numbers but by locating structural features: prior swing highs and lows, order blocks, volume profile high-volume nodes, and anchored VWAP levels from significant swing points.

Order Blocks: Where Institutions Act

An order block is the last bearish candle before a significant bullish impulse (bullish order block) or the last bullish candle before a significant bearish impulse (bearish order block). These candles represent where institutional or algorithmic orders were concentrated — the "decision point" from which the move originated. When price returns to an order block zone, the same type of order flow that caused the original move tends to re-emerge, making these levels structurally significant.

Using Levels for Targets and Invalidations

In systematic signal frameworks, TP levels are not arbitrary multiples of the stop distance. They are placed at the next structural resistance level (for LONG) or support level (for SHORT). Similarly, invalidation levels are placed just below (for LONG) or above (for SHORT) the most recent structural support or resistance that the bullish or bearish thesis requires to remain intact.

This structural approach means that TP levels and invalidation levels are objectively defensible — they are where the market has demonstrated structural significance, not where the system decided 2R profit is enough.