Support and resistance is usually one of the first things a new trader learns, and one of the last things they learn to do well. Drawing a line where price turned before sounds easy. Drawing the right lines, and ignoring the rest, takes practice.
Here’s how I do it, step by step, and the mistakes I see most often when students show me their charts.
What support and resistance actually are
Support is an area where buying has been strong enough to stop price falling, at least for a while. Resistance is an area where selling has been strong enough to stop price rising. They exist because traders remember prices. If a level held before, people watch it again, place orders around it, and their reactions often make it hold again.
The key word is area. We’ll come back to that.
Start on the weekly and daily charts
I always start from the top. Before I touch a lower timeframe, I plot support and resistance on the weekly and daily charts and mark those levels in one colour.
Those are the levels that matter most. They were formed by big moves over weeks and months, and they’re the ones larger traders are watching. A level from the weekly chart will usually carry more weight than anything you find on a 5-minute chart.
Then I drop down to smaller timeframes, like the 4-hour and the hourly, and mark additional levels in a different colour. Now, at a glance, I can see which levels are major and which are minor. When price approaches a weekly level, I treat it very differently from when it reaches a level I found on the 15-minute chart.
If you’re not used to working across timeframes, our guide to top-down analysis explains the process in detail.
Don’t go too far back
This is the most common mistake I see. Students scroll back years on an hourly chart and draw every level they can find. The chart ends up covered in lines, and every price is near something.
My rule: on most timeframes, draw what’s visible on your screen. If you have to scroll back months on an hourly chart to find a level, it’s probably not relevant to the trade in front of you. The exception is the monthly and weekly charts, where older levels can still matter because they reflect much bigger moves.
Fewer levels make better decisions. If you can’t tell at a glance which level matters most, you have too many.
Use zones, not exact lines
I mostly draw support and resistance as zones, not single lines.
Pinpointing the exact price where a level sits is close to impossible. Price rarely turns at the same tick twice. It overshoots by a few pips, or turns a little early. If you draw a single thin line and expect a perfect reaction, you’ll get caught by what looks like a break, only to watch price snap back.
A zone accepts that reality. Instead of “support at 1.0850,” think “support between 1.0840 and 1.0860.” A practical way to build one is to mark from the wicks to the candle bodies around the turning points.
Zones also help you avoid fakeouts, which is the next topic.
Fakeouts, and why each instrument is different
A fakeout is when price pushes through a level, triggers everyone who thought it had broken, and then reverses back. They’re one of the most frustrating parts of trading levels.
What many traders miss is that fakeouts don’t happen equally everywhere. Some pairs and instruments fake out much more often than others. Some timeframes are noisier than others. Gold, for example, often moves through levels more aggressively than EUR/USD before reacting.
So study support and resistance separately for each instrument you trade. Go back through your charts and ask:
- Do levels on this instrument tend to hold cleanly, or overshoot first?
- How far does price typically push through a level before reversing?
- Are fakeouts more common at certain times of day, like the London or New York open?
- Which timeframe’s levels have held best for this instrument?
In my experience, horizontal levels tend to hold more often than diagonal trendlines, but even that depends on the instrument. Once you know how a particular market behaves, you can draw your zones with the right width and set your expectations accordingly.
Where to put your stop
If you trade off a zone, your stop shouldn’t sit inside it. That’s exactly where the noise and fakeouts happen.
A sensible approach is to place the stop beyond the far edge of the zone, with a small buffer based on how that instrument typically overshoots. For a buy at support, that means below the bottom of the zone, plus a few pips of room. If price gets there, the level has genuinely failed and you want to be out.
Then size the trade from that stop distance, not the other way around. A wide zone means a wider stop, which means a smaller position. Our guides to position sizing in Canadian dollars and how much to risk per trade walk through the math.
Putting it together
Here’s the full routine:
- Weekly and daily first. Mark the major levels in one colour.
- Lower timeframes second. Add minor levels in a different colour.
- Keep it to what’s on screen, except on weekly and monthly charts.
- Draw zones, not lines, from wicks to bodies.
- Know your instrument. Adjust zone width for how often it fakes out.
- Set alerts at the zones, so you don’t have to watch all day. We explain this in currency trading strategies for Toronto traders.
- Stops beyond the zone, and position size from the stop.
The bottom line
Good support and resistance isn’t about finding every level. It’s about finding the few that matter, drawing them as zones, and understanding how each instrument behaves around them. Start from the weekly chart, keep your charts clean, and study your markets one at a time. If you’re still building your foundation, our beginner’s roadmap shows where this skill fits.
Disclosure: The author, Mike Harding, is the founder of Academy of Financial Markets in Toronto, where he teaches the mentorship program. This article is educational and is not financial advice. Trading foreign exchange carries a high level of risk and may not be suitable for all investors.