Crypto Trading 101: How to Use Support and Resistance

Support and resistance are the two prices a chart keeps bumping into. Support is a level where buyers have repeatedly stepped in and the fall stopped; resistance is a level where sellers have repeatedly taken over and the rise stalled. Learning to use support and resistance is mostly one discipline: waiting for the price to arrive at a level instead of buying somewhere in the middle because the candles look exciting.

Why does price stop at the same places?

Because people remember them. Picture a ball bouncing in a room - the floor and the ceiling are not magic, they are simply where the ball runs out of space. On a Bitcoin chart the floor is a price where buyers were happy last time and have left orders again; the ceiling is where people who bought too high are waiting to get out level. Round numbers work the same way, which is why so many orders pile up at places like $100,000 on Bitcoin or $4,000 on Ethereum. Any free chart - TradingView, or the chart built into Coinbase - shows you all of it.

How do you actually trade a level?

A level gives you three things: a place to buy, near support, where you can tell quickly whether you were wrong; a place to take profit, just under resistance, where sellers are likely waiting; and a place to put a stop, a little beyond the level rather than exactly on it. The order matters. Decide the stop before the entry, because the distance between them is what tells you how much to buy.

What happens when a level breaks?

Often it swaps roles. Resistance that finally breaks tends to become support when the price comes back down to it, because the people who sold there now want back in. But plenty of breaks are false: the price pokes through, triggers everybody's stops and snaps back. That is why most traders wait for a candle to close beyond the level, on a daily or four-hour chart, before treating the break as real.

Before risking anything, mark two or three levels on the weekly Bitcoin and Ethereum charts and just watch for a week. You will see which ones the price respects and which you imagined - and that costs nothing. Next: how to find the levels and how to draw them correctly.