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Support and resistance in practice: levels, a worked example and pitfalls

How traders use support and resistance levels: drawing zones, breakouts and retests. With a hypothetical worked example, a checklist and common mistakes.

Daytraders.nl redactie · April 18, 2026 · bijgewerkt October 10, 2026 · 6 min leestijd

In short

  • Support is a price area where the price earlier stopped falling. Resistance is an area where it earlier stopped rising.
  • Treat levels as zones, not exact lines.
  • A level can hold, but it can also break. No level gives certainty.
  • Place your stop-loss on the other side of the zone and calculate your position size from that distance.

This page shows how to use support and resistance in practice. The full explanation is in the tutorial Support and resistance trading.

What problem does it help with?

A trader wants to know where to enter, where to place the stop-loss and where to take profit. Earlier turning points of the price give something to hold on to. Many market participants look at the same levels, so the price sometimes reacts to them.

This is not a law. A level that held three times can break the fourth time. Support and resistance are a way to structure your plan, not to predict the price.

How traders use it in practice

Drawing zones

Look at a higher timeframe (for example daily) for clear turning points. Do not draw a thin line but a zone a few percent wide, depending on the market. The more often the price reacted there and the more trading took place, the more important the level is usually considered. Keep it tidy. A chart full of lines does not help.

Trading in the zone

Some traders look for an entry when the price touches a zone and turns there, for example with a reversal candle. The stop-loss then sits just beyond the zone. If the price falls through the support, the idea is invalid and you close the position.

Breakout and retest

If the price breaks through resistance, that level often becomes support (and the reverse). Some traders wait for a retest: the price returns to the old level and holds. Waiting reduces the chance of a false breakout, but you sometimes miss the move. A retest can fail too.

Worked example (hypothetical)

This example is made up and only shows the steps.

  • A share returned three times to a resistance zone around €22 and turned each time. It then closes above €22.30 on the daily chart.
  • The price falls back to €22 and holds. A trader enters at €22.20.
  • The stop-loss is at €21.40, below the zone. The risk is €0.80 per share.
  • Account: €10,000. Maximum loss per trade: 1% = €100.
  • Position size: €100 / €0.80 = 125 shares (about €2,775).
  • Target: the next resistance at €24. That is €1.80 per share, more than 2 times the risk.

If the price falls below €21.40, you lose about €100 plus costs. If it reaches €24, you gain about €225 minus costs. The example says nothing about how often this happens. A breakout can also fail and reverse.

Checklist before a trade

  1. Is the level clear, on a higher timeframe and touched several times?
  2. Am I drawing a zone rather than an exact line?
  3. Does the trend point in the same direction as my idea?
  4. Do I have confirmation, such as a reversal candle or a successful retest?
  5. Where is my stop-loss, beyond the zone, and does the risk fit my limit?
  6. Is there enough room to the next level for a reasonable target?
  7. Are the costs small relative to the target, and is news scheduled?

Common mistakes

  • Drawing too many levels. The more lines, the easier it is to find a reason afterwards.
  • Expecting an exact line. Prices often overshoot a level briefly and then return.
  • Entering without confirmation. “The price is there” alone is not a reason.
  • Placing the stop-loss too tight. Noise takes you out while the idea was still right.
  • Overrating levels on a small timeframe. Levels on a daily chart usually carry more weight than those on a minute chart.

Risk management

Place the stop-loss beyond the zone and then calculate the position size, not the other way round. If the risk does not fit your limit, the position gets smaller or you skip the trade. Tools:

Around breakouts and news the price can jump past your stop-loss. Volatility is then higher, and your loss can be larger than planned.

Costs

When trading around levels, profit targets are often small. The spread is the difference between the buy and sell price and can then eat a noticeable part of the gain. Compare provider costs on Compare brokers.

Summary

Support and resistance give you a framework for entry, stop-loss and target. Draw zones on a higher timeframe, wait for confirmation and calculate your position size from the stop distance. Levels can break and the market works differently per instrument and timeframe. The full explanation is in the tutorial Support and resistance trading.

This is educational information, not investment advice. Trading involves risk and you can lose all or part of your capital.