Support and resistance are price levels where the market repeatedly pauses, reverses, or struggles to break through.
Support acts as a floor beneath the price, where buying interest becomes strong enough to halt or reverse a decline.
Resistance functions as a ceiling above the price, where selling pressure increases enough to stop or reverse an upward move.
These levels form because traders remember where prices previously turned around and place their orders accordingly.
They appear as horizontal lines, diagonal trend lines, or zones on a chart.
When price approaches these levels, it often bounces back.
If price breaks through convincingly, the old support can become new resistance, and vice versa.
Institutional traders often create these significant levels through large order placement, which generates concentrated buying or selling activity at specific price points.
Traders can enhance their analysis of these levels by examining price distribution patterns to identify where the most trading activity has occurred.
In short: Support and resistance are key price levels where the market tends to pause or reverse direction due to concentrated buying or selling pressure.
Example in Action
USD/ZAR is trading at 18.5000 and repeatedly drops to 18.2000 over three weeks, but each time it touches that level, buyers step in and push price back up—this makes 18.2000 a clear support level.
On the upside, rallies consistently stall near 18.8000 where sellers take profits, establishing 18.8000 as resistance. After the fourth attempt, price finally breaks above 18.8000 on strong volume and climbs to 19.0000.
When USD/ZAR pulls back to retest 18.8000, it bounces upward instead of falling through, confirming that the old resistance has now flipped to become new support. This breakout pattern signals a shift from range to trending behavior, requiring traders to adjust their strategy from boundary-based trading to trend-following techniques. Traders should evaluate the risk-reward ratio before entering the position to ensure the potential profit justifies the downside risk if the newly formed support fails to hold.
Why It Matters
Why does any of this matter to traders in Lagos, Nairobi, or Johannesburg? Simple.
Support and resistance levels define where price bounces or breaks. They guide entry points, stop-loss placement, and profit targets. Without them, traders gamble blindly. With them, risk becomes measurable.
These zones reflect collective psychology and order flow concentration. They're not magic—just patterns of where buying and selling pressure repeatedly clash.
Common Questions
How Do African Currency Volatility Spikes Affect Support and Resistance Levels?
African currency volatility spikes frequently invalidate established support and resistance levels through sudden price breaks, persistent depreciation shifting zones downward, and wide intraday swings that trigger stops—forcing traders to constantly redraw technical levels and adapt risk protocols.
Which African Brokers Offer the Best Tools for Identifying Support and Resistance?
Axi, Tickmill, and AvaTrade (Official Site 🔗) lead among African brokers, offering MetaTrader platforms with automated support/resistance indicators, pivot point calculators, and Fibonacci tools. FXCM South Africa and Exness also provide robust charting capabilities and real-time data feeds for precise level identification.
Do Support and Resistance Strategies Work During Local Holiday Trading in Africa?
Support and resistance strategies become less reliable during African local holidays due to severely reduced liquidity and trading volume. Price gaps, false breakouts, and erratic swings are common, undermining traditional technical setups and increasing risk for traders relying solely on these levels.
How Does Poor Internet Connectivity Impact Real-Time Support and Resistance Trading Decisions?
Poor connectivity delays order execution and distorts live price feeds, preventing African traders from accurately entering or exiting at support and resistance levels, increasing slippage, invalidating technical signals, and exposing accounts to unplanned risk and losses.
Can Support and Resistance Be Reliable With Low Liquidity African Currency Pairs?
Support and resistance zones are considerably less reliable with low liquidity African currency pairs due to frequent price gapping, wider spreads, erratic order flow, and vulnerability to false breakouts, requiring traders to apply broader zones and additional confirmation filters for improved accuracy.
« Back to Glossary Index
