Support and Resistance Levels: 6 Criteria to Spot Trades, Not Chaos on the Chart

You will learn about advanced techniques and setups for easily identifying support and resistance levels — like the pros. Forget everything you've heard before. This will be a modern school — what truly works. We'll look at real trading scenarios and 6 criteria for high-probability trades.

Support and resistance are the foundation of technical analysis; understanding them is essential for reading charts correctly. Levels are analyzed on Japanese candlestick charts, but to filter out market noise, pros also use Heikin Ashi. It won't be difficult because we'll start with the basics.

What are support and resistance?

A simple analogy to understand:

• Support is like the floor — price usually doesn't fall below it. Here buyers step in and stop the decline.
• Resistance is like the ceiling — price doesn't rise above it. Here sellers push back and stop the advance.

These are not thin lines, but rather zones where large players place their orders.

These are exactly the zones where price has reacted before and may potentially react again in the future. We highlight these important levels because they can serve as potential entry or exit points.

When price reaches a previous support or resistance point, one of two things happens:

1. either price bounces off the level,
2. or it breaks through and continues moving in the same direction until the next level.

It's important to understand that a chart can have multiple support levels, which in technical analysis are often labeled as S1, S2, and S3.

Why does support and resistance work?

Levels work because they reflect the real nature of human thinking. Traders remember past reversals, so they close positions at historical extremes — and levels emerge. Many traders see the same level and act the same way — like following traffic rules.

Round numbers also help form levels. People like whole values (10, 50, 100), and large players place orders at them.

And finally, a broken support becomes resistance because trapped traders rush to exit at breakeven when price returns. This is called a mirrored level, as shown below:

It's all like a self-fulfilling prophecy. Levels work because traders believe in them. And because of that belief, traders collectively buy at support and sell at resistance — thereby creating those levels themselves.

By the way, levels are not always horizontal — when price moves at an angle, trendlines appear, working on the same psychological principles.

A simple real-life example to remember: a price of $25 for strawberries becomes resistance because buyers lose interest (too expensive), while $10 becomes support because they start buying actively (cheap).

We'll definitely plot these levels on the chart, but first it's important to understand the criteria.

Criteria for defining support and resistance levels

Here are the specific principles and factors you look for when spotting support and resistance levels.

Criteria for a strong level:

1. Swing highs and swing lows — these are the peaks used to draw classic support and resistance levels.
2. Multiple bounces — the more times price has bounced, the more reliable the level.
3. Obviousness — the level should stand out at first glance.
4. Sharp rebound — strong candles, instantly moving away from the level.
5. Dual role — the level has acted as both support and resistance.
6. Freshness — priority to levels formed recently.

You don't have to meet all criteria at once, but the more matches — the stronger the level!

Now let's move to real charts and examine each criterion in detail.

1. Swing highs and swing lows

In the example below, look left and see that price rose, reached a point, and bounced. That's the highest point recently — a swing high forms. We mark it as a resistance level.

Similarly at the bottom: price fell, reached a point, then reversed twice — that's the lowest point, a swing low, which we mark as a support level:

Always remember: we do NOT enter trades blindly at support and resistance levels without confirmation. No matter how high or low the price is and whether the level criteria are met, always wait for price action, entry signals, and final confirmations.

One of the most reliable confirmation signals is a Change of Character (CHoCH), which indicates that whales have seized the initiative.

2. Multiple bounces

As you can see below, price approached the area four times over different periods, and each time it instantly reversed on approach. That's 4 bounces — a resistance level:

The significance of this is that multiple bounces indicate a repeated price reaction at this level, showing that traders acted here across several time periods. We can use that in our trading.

For a horizontal level to be considered confirmed and valid, it must pass through at least 2, and preferably 3 or more extremes (touches)!

3. Obviousness of the level

The level should be obvious! On the chart below you see a very noticeable level: price rose, touched, and reversed — that's clear resistance.

The same situation below: price fell, touched, and reversed — easily noticeable.

However, there are non-obvious minor levels (e.g., in the left corner or the next one). Minor levels can be useful for scalping or swing systems.

The more obvious the level, the more traders consider it important. This increases the likelihood of actions at this level (placing orders, take-profits, or stop-losses).

4. Sharpness of the rebound

The rebound from the level should be sharp, meaning price reverses with large candles.

Look below: price bounced sharply from this level — that's a support level.

Next — another sharp reversal, another support level. And above, each approach to this area ended with a sharp reversal — yet another level.

The sharper and more impulsive the price bounce from a level, the stronger that level is considered.

When looking for entry points, priority should be given to those zones from which price flew away like a scalded cat in the past.

Lack of sharpness when touching a level is a serious reason to doubt its reliability!

5. Dual role of a level

The level serves simultaneously as both support and resistance. Each time price reached this support level, it reversed.

Finally, the level was broken, and then price returned from below — the former support turned into resistance, price touched it and bounced, demonstrating a dual role.

In technical analysis, levels are not static lines but zones of interest that can act as both support and resistance depending on price. The mechanics are based on psychology: when price returns, losing traders close at breakeven, and large players remember liquidity zones. These areas are often called Liquidity Zones. To see where the crowd's money is hidden, traders use liquidation maps.

Such zones provide entry points on role reversals with a good win rate and tight stops just beyond the zone boundary.

6. Relevance of the level (freshness)

The last criterion — the level was formed recently.

As shown below, price bounced off this resistance three times in a row over a very short period. That means the level is still relevant.

If you look further to the left, you see an old swing high, but fresh bounces are always more effective — they are current and new. Don't forget: the freshest takes priority.

It's important to understand that an excessive number of touches (more than 4) leads to the gradual execution of limit orders. This exhausts the zone and increases the likelihood of a breakout. Therefore, the chart requires daily cleaning of levels that have been broken without a price reaction or repeatedly crossed by candle bodies, to eliminate market noise and maintain analysis accuracy.

Practice: combining criteria on charts

Now, knowing the criteria, let's combine them and apply them to charts to identify support and resistance levels. Remember: one sign is enough, but the more, the better.

Let's start at the very top: the level where price rose, touched, and reversed.

Which criteria are met?

Here 4 criteria:

1. swing high (the highest recent point),
2. level is obvious,
3. sharp movement (sharp rebound),
4. and multiple bounces (3 minor ones).

The next level — 6 bounces.

Signs: multiple bounces (6 total), the level acted as both support and resistance, it's relevant, there is sharp movement and obviousness.

Moving lower — another level with 4 bounces.

This is a swing low (the lowest recent point), has multiple bounces (4), sharp movement, is obvious, and appeared recently.

Let's try on another pair. At the top: price rose, touched, reversed — that's a swing high, sharp movement, and obviousness.

Then on the left: a level with sharp movement and obviousness.

On the right — another level with the same signs:

Then a very important level, including 4 criteria:

1. multiple bounces,
2. works in both directions,
3. sharp movement (significant rebound),
4. and obviousness.

Finally, at the very bottom - price fell, touched, and reversed. This level is a swing low, has bounces, sharp movement, obviousness, and is relevant. Now all key levels are plotted.

Professionals never enter blindly on the first touch. They wait for confirmation in the form of a candlestick pattern (Pin bar, Engulfing) or indicator reaction (RSI) within the zone.

Lines or zones? Choosing your drawing method

Another common question: how to decide whether to draw lines or zones, and which to prefer? Above is a resistance level. But how to draw level lines: based on closes or candle wicks?

For the upper level, there are 3 options:

1. One solid line — if it passes through all reversal points.
2. Multiple lines by closes — but they clutter and confuse the chart.
3. Zones — covering most candle bodies and wicks. This is our preferred method, as it keeps the chart clean.

Remember: it doesn't matter whether they are lines or zones — both denote support and resistance areas. That is, we always wait for price action to enter a trade in the general area, not at a specific price line.

Moving lower — another level, we draw a zone. You might ask why we didn't include some candles in the zone? Here's a pro tip: don't draw zones that are too wide — that creates confusion. Draw narrow zones that cover most touches and points. This is clearly shown below:

If we drew a huge zone to cover that minimum, it would look terrible, and the large width would confuse you (especially when using multiple timeframes). Instead, draw a narrow zone that touches most bodies, wicks, and points. One point here is considered a false breakout. At the bottom — a swing low, draw a line.

The result is a clean chart with key levels.

Example with four zones

Let's look at another real example. At the top — a swing high, draw a zone covering most closes and wicks.

Next — the following level, again a zone. Then — bounces, draw a zone. And at the very bottom — another support level, a zone.

That's it, traders. Now it's time to look at the pitfalls.

What are the hidden dangers of support and resistance levels?

Technical analysis with support and resistance often leads to losses, especially for beginners. These levels are not an exact science. It all depends on your subjective perception.

False breakouts are situations on the chart where price crosses a support or resistance level but fails to close beyond it and quickly returns to the previous range.

Ideal levels do not guarantee a bounce. Price breaks the boundary, you enter on the breakout, and then it sharply reverses.

Large players do this to collect liquidity — they hunt for traders' stop-losses. Without confirmation by volume or candlestick patterns, entering on a breakout turns into a trap for your account!

The next drawback is subjectivity and analysis paralysis. There is no single correct method for drawing levels. Some take candle bodies, others take wicks, others take historical extremes.

This is why it is so important not only to understand these zones but also to be able to look for confirmations. Take a look at the image below:

This image explains the main pitfall: you cannot trade simply from a level, lacking market structure and a confirmation signal. Without C (confirmation), a level is often useless.

If you plot every possible level — locals, round numbers, indicator-based — without understanding the market, you get a mess. This causes analysis paralysis: due to conflicting signals, you are afraid to enter trades or constantly doubt.

Summary

The essence of this entire guide is as follows. To identify support and resistance levels, we use 6 criteria:

1. swing highs/swing lows (the highest and lowest points over a period),
2. multiple bounces (the more the better, e.g., 6 bounces),
3. obviousness of the level,
4. sharpness of the bounce (immediate reversal with large candles),
5. dual role (the level acted as both support and resistance),
6. and freshness (priority to recent levels).

In practice, one criterion is enough, but reliability increases with each additional one. When drawing, it is preferable to use narrow zones (rather than lines) that cover most candle bodies and wicks, avoiding wide zones that lead to confusion across multiple timeframes.

It is important to remember that levels are price zones, not exact prices. Their strength is directly proportional to the number of tests and trading volume. In these zones, due to the accumulation of stop-losses and large orders, false breakouts (liquidity runs) and reversals often occur.

At a breakout, 70–80% of the time a role reversal occurs: support becomes resistance and vice versa. A breakout is considered valid if it is accompanied by a volume increase of 20–30% above average and is confirmed by a retest with volume above average (e.g., weekly).

What about trends and entries?

• Trend is determined by the 200-period exponential moving average (EMA). Buy only when price is above the line.
• Entry requires 3 factors to align: trend, support/resistance zone, and a candlestick pattern (e.g., bullish engulfing after a pullback to support).
• Stop-loss — with a buffer below the low, target just below the nearest resistance.

Always keep market structure in mind:

After firmly and clearly defining the market structure, we draw support and resistance zones, and then look for confirmations. This sequence yields not chaos, but a clear, interconnected, consistent strategy.

The green rectangle denotes the potential profit zone (Take Profit), and the red one — the loss limitation zone (Stop Loss) below the support level. At the bottom is the RSI oscillator, showing a move out of the oversold area when the confirmation signal forms.

We still need to understand a couple more pro techniques regarding methods.

What are the ways to build levels?

• Weekly candles with long wicks and body – good for horizontal lines.
• Fibonacci levels (0.382; 0.5; 0.618; 1; 1.618) — we use them on daily and 4‑hour timeframes.
• Levels are first defined on the higher timeframe (weekly), then checked on lower timeframes (daily, 4 hours), where price repeatedly tests the zone before a breakout or bounce.

Finally, about tools. In TradingView, we recommend indicators based on pivot points with a length setting of 20 (20 bars left and right), such as Pivot Points High Low and Trendline Pivots.

Afterword: we have been trading since 2018 and have tested hundreds of strategies and indicators. Choose your trading system in our trading section! Yours, editor Pavel Grachev for bytwork.com.

This material is for informational purposes only and does not constitute financial advice.