What Is Support and Resistance? Meaning, Examples & How Traders Use It

By Direct Margin Academy

Introduction

In the Indian share market, prices do not move randomly. They move between zones where buyers are active and zones where sellers dominate. These zones are known as Support and Resistance.

Understanding support and resistance helps traders enter at the right price, exit with confidence, and manage risk effectively. At Direct Margin Academy, this concept is one of the first and most important lessons we teach to beginners and active traders.

What Is Support? (Definition)

Support is a price level where a stock or index stops falling and starts bouncing upward due to strong buying interest.

At support:

• Buyers are stronger than sellers
• Demand exceeds supply
• Price finds a temporary floor

What Is Resistance? (Definition)

Resistance is a price level where a stock or index stops rising and starts falling due to selling pressure.

At resistance:

• Sellers are stronger than buyers
• Supply exceeds demand
• Price finds a temporary ceiling

Simple Example (Indian Market)

Example: Reliance Industries

• Price falls to ₹2,500 multiple times and bounces up → Support
• Price rises to ₹2,700 multiple times and reverses → Resistance

Traders buy near support and sell near resistance.

Why Support and Resistance Are Important for Traders

Support and resistance help traders:

• Identify low-risk entry points
• Decide profit booking levels
• Place stop-loss accurately
• Avoid emotional trading
•  Professionals trade levels, not emotions.

Types of Support and Resistance

1.Horizontal Support & Resistance

• Formed at previous highs and lows
• Most commonly used

Stronger when tested multiple times.

2.Trendline Support & Resistance

• Created using rising or falling trendlines
• Useful in trending markets

3.Moving Average Support & Resistance

• 20 EMA, 50 EMA, 200 EMA act as dynamic levels
• Widely used by institutions

4.Psychological Levels

• Round numbers like 100, 500, 1000
• Strong emotional zones

How Traders Use Support and Resistance

✔ Buying Near Support

• Enter near support
• Place stop-loss below support

✔ Selling Near Resistance

• Book profits near resistance
• Initiate shorts near resistance (advanced traders)

✔ Breakout Trading

• Buy when price breaks resistance with volume
• Sell when price breaks support

Breakout + volume = strong move.

Support Turns into Resistance (Role Reversal)

When:

• Support breaks → becomes resistance
• Resistance breaks → becomes support

This concept is crucial for trend trading.

Case Study 1: NIFTY Support Level

• NIFTY holds 22,000 level multiple times
• Buyers step in

Result: Strong bounce

Learning: Major indices respect key support zones.

Case Study 2: Bank Nifty Resistance Breakout

• Bank Nifty breaks resistance with volume
• Resistance becomes new support

Result: Trending move

Learning: Breakouts create momentum.

Common Mistakes Traders Make

• Drawing too many lines
• Ignoring higher timeframe levels
• Trading without confirmation
• Not using stop-loss

How Direct Margin Academy Teaches Support & Resistance

✔ Level identification techniques
✔ Multi-timeframe analysis
✔ Live Indian market charts
✔ Entry, target & stop-loss planning

Final Thoughts from Direct Margin Academy

Support and resistance are the foundation of technical analysis. When mastered, they help traders trade with clarity instead of confusion.

“The market respects levels more than opinions.”

Want to Learn Support & Resistance Practically?

Direct Margin Academy’s Technical Analysis & Price Action Program

Trade with levels. Trade with confidence.