How to Determine Valid and Strong Support and Resistance
Introduction: The Importance of S&R Validity
Do you often feel frustrated? You have spent hours drawing Support and Resistance lines on the chart, believing that you have found the perfect turning point. However, just when you press the buy or sell button, the price breaks through that line easily, causing your account to suffer unnecessary losses.
If this scenario sounds familiar, you are not alone. Support and Resistance (S&R) is a fundamental concept in technical analysis, often referred to as the foundation of successful trading. Unfortunately, the basic understanding taught out there is very minimal and misleading. Everyone can draw lines, but only a handful of professional traders truly know How to Determine Valid and Strong Support and Resistance.
The problem does not lie in the S&R concept itself, but in the quality of your identification. Modern markets, dominated by algorithms and large institutions, are intentionally designed to "clean out" retail traders who use S&R levels that are too obvious and weak. They seek liquidity around the lines you draw.
This article is compiled as a definitive and in-depth guide, which will take your S&R analysis from amateur to senior level. We will uncover the secrets of validation, confluence, and market psychology that allow you to distinguish between fragile fake S&R lines and strong S&R zones that are truly respected by institutions. Get ready to totally change the way you view charts.
1. Why Classic S&R Often Fails: Focus on Price Zones
The traditional S&R concept teaches us to connect two or three high points (for Resistance) or low points (for Support). While this is a good basis, this approach is highly vulnerable to false breakouts and whipsaws (rapid back-and-forth price movements).
The main failure lies in two things: excessive accuracy and ignoring market context.
Excessive Accuracy (Thin Lines): Many traders try to determine S&R down to the most precise pip numbers. They draw thin horizontal lines at the price of 1.25500. When the price approaches this level, professional traders know that this is an area where many retail stop-loss orders are placed. Institutions will intentionally push the price slightly past that thin line—say up to 1.25480 or 1.25520—to trigger liquidation, before reversing direction. This is a liquidity trap.
Ignoring Market Context: S&R must always be viewed in the context of the larger trend and current market conditions (volatility, fundamental news). A strong Support in a sideways (flat) market might be easily broken in a trending market. If you only focus on past touch points without considering current buying or selling pressure, your lines will mean nothing.
Important Lesson: S&R is not a static laser line. S&R is a battle area, a zone where an imbalance between Supply and Demand occurs. To Determine Valid and Strong Support and Resistance, we must start thinking in terms of zones (boxes), not lines.
2. The Power of Time Frame (TF) as a Key Validity Filter
One of the biggest mistakes new traders make is giving equal weight to S&R identified on a 5-minute Time Frame (TF) as S&R on Daily or Weekly TFs. The market has a strict hierarchy; the higher the TF, the greater the institutional weight of the level you identify.
Golden Rule of TF Hierarchy: S&R formed on higher TFs is always stronger and more valid than that formed on lower TFs. This is the first and most important filter for identifying strong levels.
Why Are High TFs So Important? Large institutions and investment banks do not run their strategies based on M5 or M15 movements. They plan multi-week or multi-month positions, which means they look at Daily (D1) and Weekly (W1) charts. When a price bounces off Weekly S&R, it indicates that big money truly respects that level, making it a highly reliable zone for entry or exit.
Practical Step: Top-Down Analysis for S&R Validation:
- Start from W1/D1: Identify major S&R levels, especially historical turning points that caused significant price movements. Mark these areas as Major S&R Zones.
- Drop to H4: Check if Major S&R from D1 coincides with local S&R on H4. If so, its validity increases drastically.
- Use H1/M30 for Confirmation and Entry: The S&R levels you use for entry must always be adjacent to Major D1/W1 S&R Zones. If your S&R is only visible on M15 and has no relation to higher TFs, it is likely invalid market noise.
By using high TFs as a filter, you effectively ignore short-term noise that is often misleading, and only focus on levels truly supported by volume and institutional decisions.
3. Identifying Supply and Demand Zones, Not Just Lines
As mentioned earlier, to find out How to Determine Valid and Strong Support and Resistance, we must shift focus from lines (single prices) to Zones (Price Areas). This concept is best explained through the lens of Supply and Demand.
S&R Zones are areas where imbalances occur causing dramatic shifts in market control (from bull to bear or vice versa).
How to Draw Zones Correctly? S&R Zones must include two main elements: wicks (candle tails) and bodies (candle bodies).
- Outer Boundary (Wick): The longest wick represents the extreme price the market attempted before institutions pushed the price back. This is the outer limit of the liquidity zone.
- Inner Boundary (Body/Close): The candle body (open or close price) indicates where the price actually stabilized before reversal. This is the "core" of the S&R.
Zone Thickness: The thickness of this zone can vary, from 10 pips to 50 pips, depending on the currency pair and TF used. The right zone allows you to set a Stop Loss (SL) slightly outside the zone's outer boundary (beyond the longest wick), giving enough breathing room for your trade from institutional whipsaw maneuvers.
Flip Zones (Role Reversal): One characteristic of very strong S&R is its ability to flip (change roles). Strongly broken Support then turns into strong Resistance, and vice versa. Levels that have shown clear flip capabilities in the past (e.g., being support three times and then, after being broken, becoming resistance twice) have extraordinarily high validity and strength.
4. Testing S&R Strength Through History and Touch Count
It's not just about where you draw S&R, but how much the market has tested and respected that level in the past. S&R strength is measured by its historical interaction.
The Meaningful Touch: Not all "touches" are created equal. A valid touch is one followed by a significant price response (clear and sharp reversal). If the price just "stalls" for a few small candles before breaking through, that is not a strong touch.
Example of Touch Strength: For instance, the price approaches the 1.3500 level. If the price touches 1.3500 and bounces 150 pips down within a few hours, that is a strong response indicating a large number of sell orders waiting at that level. This level should be marked as high-priority S&R.
Diminishing Returns Principle: Although strong S&R should be tested more than once, there is a limit. S&R levels tested many times (more than five or six times) without significant time intervals tend to weaken. Every time a level is tested, some of the waiting orders (liquidity) at that level are executed.
Imagine S&R as a brick wall. Every time the price hits it, some bricks crumble. By the seventh or eighth touch, the wall is much weaker and prone to a strong breakout. The strongest levels for entry are levels tested 2-4 times, or levels not tested for a long time (called Fresh S&R or Fresh Zone).
5. Confluence Principle: Building Evidence for Strong S&R
The most reliable S&R levels in the market never stand alone. These levels are always reinforced by confluence—a point where several different technical analysis tools converge at the same price, providing undeniable validity. Confluence is the key to How to Determine Valid and Strong Support and Resistance that will be respected by institutions.
Confluence as a Confidence Filter: If you find a Support Zone at 1.2800, and at the same level you also see:
- Major Support Line from Weekly TF.
- 61.8% Fibonacci Retracement Point.
- 200-Day Moving Average (MA) Line.
- Psychological Round Number (1.28000).
Then, level 1.2800 is not just ordinary Support; this is a Major Confluence Zone. The probability that the price will bounce or react strongly in this zone is much higher than S&R levels supported only by touch history.
Integrating Trend Indicators: Moving Average (MA) is a very effective tool for finding confluence. Long-term MA (e.g., EMA 200, SMA 100) acts as dynamic Support in an uptrend and dynamic Resistance in a downtrend. If the horizontal S&R you identify coincides with an upward-sloping MA line (during an uptrend), then that level is reinforced.
Confluence with Fibonacci: Fibonacci Retracement levels (especially 50%, 61.8%, and 78.6%) often function as magnets for price, as many institutional algorithms are programmed to target these levels. When historical S&R coincides exactly with one of the key Fib levels, that level acts as a high-probability area for your entry.
6. Understanding Market Psychology and the Role of Round Numbers
Technical analysis is fundamentally the study of mass psychology. S&R becomes strong because many traders and institutions believe the level is important, thus placing large orders there. Round numbers play a crucial psychological role.
Round Number Magnetism (Big Round Numbers): Numbers like 1.10000, 150.00, or 0.75000 are called Big Round Numbers or psychological levels. Institutions tend to place large orders (both Stop-Loss, Take-Profit, and new entries) at these easy-to-remember numbers, not at odd numbers like 1.10342.
These round numbers automatically become very strong S&R, even without clear touch history in the past, simply because of order accumulation there. When you determine valid S&R, always check if the level coincides with or is very close to a round number (00, 50, or 000).
Psychological Implications of Volatility in S&R Zones: When price enters a strong S&R Zone, you will often see increased volatility and candles with long wicks. This is a sign of a battle between buyers and sellers, which is visual validation that the zone is being defended by institutions. Long wicks on high TFs near S&R Zones are very strong validity signals. It shows the market tried to break the level but failed.
7. Entry and Exit Strategies Using Validated S&R
Once you are proficient in How to Determine Valid and Strong Support and Resistance through confluence, high TF, and psychology, the final step is using them effectively in trading strategies.
Waiting for Retest/Flip Confirmation: Valid and strong S&R often offer the best entry opportunities after being broken and then retested. If strong Resistance is broken upwards, it turns into new Support.
- Retest Process: Do not immediately buy as soon as price breaks Resistance. Wait for the price to drop back and retest that level (now as new Support). Look for rejection confirmation in the form of a reversal candlestick pattern inside the flip S&R Zone. Entry after retest offers a much better risk-reward ratio (RRR) and reduces false breakout risk.
Smart Stop Loss (SL) and Take Profit (TP) Placement: A common mistake is placing SL right at the S&R line boundary. Remember, S&R is a Zone.
- SL Placement: Your SL should always be placed outside the outer boundary of the validated S&R Zone. If you entry at Support, place SL a few pips below the lowest wick forming that zone. This protects you from liquidity grab maneuvers.
- TP Placement: The Take Profit (TP) target should ideally be placed at the nearest next Major S&R Zone. Avoiding overly ambitious TPs and ensuring TP is below/above the next S&R Zone is key to securing consistent profits.
Empowering Conclusion
Mastering How to Determine Valid and Strong Support and Resistance is a transformative step in your trading journey. It is no longer just drawing lines on a chart; it is the art of reading market psychology, understanding Time Frame hierarchy, and seeking convincing confluence.
You have learned that strong S&R levels must be:
- Defined as Supply and Demand Zones, not single lines.
- Validated by High Time Frames (H4, D1, W1).
- Reinforced by Confluence with other tools (Fibonacci, MA, Round Numbers).
- Showing significant and clear Price Response when tested.
Stop the habit of trading based on intuition or fragile S&R lines. Start practicing top-down analysis and look for layered evidence (confluence) before you consider a level as a high-probability entry opportunity.
The market always moves, but the psychological principles forming strong S&R will always remain the same. Now, it's time for you to take your chart, erase all weak S&R lines, and start defining Zones truly counted by professionals. Your analytical power is in your hands. Start trading like a senior trader today.
By: FXBonus Team
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