Seaside Town · Camp 3 · Breakwater
Support and resistance
The stone breakwater that shields the town from storms is where the waves break, every single time. Charts have places like that too: levels where price turns again and again.
The camp's rules
- 01
Support: a zone where falling price keeps finding buyers. Resistance: a zone where rising price keeps finding sellers.
- 02
A level isn't a single price but a zone. The more often it's been tested, the more people watch it.
- 03
Reaching a level isn't a signal. The signal is how the candle at the level closes: a hammer, a long wick, an engulfing.
- 04
If a strong body closes on the other side of a level, the level is broken and the idea in that direction is dead.
- 05
In a range, look for trades at the edges. The middle is a coin flip: waiting is a decision too.
- 06
Buying right under resistance is rowing straight into the breakwater.
Teaching
Support is a zone
If price has turned up from the same zone two or three times, buyers are waiting there.
Think of a level not as one line but as a zone a few prices wide: sometimes the wave breaks a little above the stone, sometimes a little below.
The more a level gets tested, the more people watch it.
Nazım · Lighthouse keeper
Reaching support isn't enough
When price reaches support, one of two things happens: it holds or it breaks.
The sign that it's holding is in the candle at the level: long lower wicks, a hammer, a bullish engulfing.
The sign that it broke is a strong body closing below the level.
Nazım · Lighthouse keeper
Resistance
Resistance is the mirror image of support: the zone where rising price meets sellers.
Previous highs are the most natural resistance. People who bought there and lost money are waiting, thinking "if it gets back to breakeven, I'm out."
Long upper wicks and shooting stars at resistance show the sellers are there.
Nazım · Lighthouse keeper
Between two stones
When price swings back and forth between support and resistance, the market is in a range.
A range says buyers and sellers are in balance: there's no trend, and neither side has the upper hand.
In a range, the trade ideas are at the edges: buy at support, sell at resistance. Both only after you see a sign the level is holding.
Nazım · Lighthouse keeper
Waiting is a decision
Not trading isn't "doing nothing." Passing on a bad trade saves your capital for the next good one.
In this app, Wait is always an option. Picked in the right place, it counts as a win; but if price makes a sharp move one way, it counts as a missed opportunity.
The rule is simple: at the edges, look for a sign; in the middle, wait.
Nazım · Lighthouse keeper
Lessons · 5
- Story
Breakwater
The stone where the waves break, and the auction's two limits: support and resistance.
- Lesson
Finding support
Find support, and tell a level that holds from one that breaks.
- Lesson
Resistance and rejection
Find resistance and read a rejection there.
- Lesson
The range
Look for trades at the edges of a range, and wait in the middle.
- Exam
Breakwater exam
Read support, resistance and ranges on realistic charts.
Test yourself
Why is buying right under resistance a bad idea?
- ✓ There's little room to gain; sellers are waiting just above
- · Price always falls at resistance
- · Never buy on a green candle
Resistance is a wall in front of price. Buy at the foot of the wall and you have a short way to gain and a long way to lose.
What loses you the most money in a range?
- ✓ Trading in the middle by guessing the direction
- · Waiting for a sign of a hold at the edges
- · Not trading in a bad spot
The middle of a range is where both directions are open to stop hunts. Waiting for a sign at the edges and passing on bad trades protects your capital.