Introduction
In the world of trading, Support and Resistance (S&R)
are two of the most important concepts every trader must understand. Whether
you’re trading Forex, Stocks, or Deriv platforms like DTrader, SmartTrader,
or MT5, knowing how to spot support and resistance can dramatically improve
your decision-making.
In this guide, we’ll explain what support and resistance are, why they matter, and how to use them with real-world examples.
What is Support?
Support is a price level where an asset tends to stop
falling and often bounces back upward. It acts as a floor where
demand increases, preventing prices from dropping further.
👉 Example:
Imagine a stock trading between $50 and $60. Every time the price drops
to $50, buyers jump in, pushing it back up. Here, $50 is the support
level.
📊 On Deriv, you might see
this when trading indices – if a market drops to a certain point and
consistently rebounds, that’s your support zone.
What is Resistance?
Resistance is the opposite of support. It’s a price level
where an asset struggles to rise above because sellers enter the market,
creating supply pressure.
👉 Example:
Using the same stock, if the price keeps rising to $60 but fails to go
higher, then $60 is the resistance level.
📊 On Deriv MT5, if
volatility index prices always stall around a certain level before dropping,
you’ve identified resistance.
Why Support and Resistance Matter
- Entry
& Exit Points – Traders often buy near support and sell near
resistance.
- Risk
Management – Knowing these levels helps place better stop-loss and
take-profit orders.
- Trend
Confirmation – Breaking through resistance may signal a strong
uptrend, while breaking support can confirm a downtrend.
Examples on Deriv Platforms
Example 1: Using Support on DTrader
Suppose you are trading Volatility 100 Index. The
price touches 12,500 multiple times but always bounces upward. If you
open a Call trade near 12,500, you’re relying on the support level.
Example 2: Using Resistance on SmartTrader
If the Crash 500 Index keeps reaching 9,000
but struggles to move higher, placing a Put trade near that level takes
advantage of resistance.
How to Draw Support and Resistance Levels
- Look
at previous highs and lows on the chart.
- Use
candlestick wicks and bodies to spot levels where price reversed.
- Mark
horizontal lines where price has touched multiple times.
💡 Pro Tip: Combine
S&R with indicators like RSI or Bollinger Bands for confirmation.
Common Mistakes Beginners Make
❌ Expecting levels to be exact –
they are often zones.
❌
Ignoring multiple timeframes – a level on a
1-minute chart may not matter on a daily chart.
❌
Trading without stop-losses – support and
resistance can break!
Conclusion
Understanding support and resistance is crucial for
building a solid trading strategy. These levels act as roadmaps that help
traders identify potential turning points in the market.
👉 If you’re new to
trading, start by practicing spotting support and resistance levels on a Deriv
demo account before moving to real trades.
📌 Ready to try it
yourself?
Sign up for a free Deriv account today and practice with real charts:
👉
Create your account here
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