Definition
SupportSupport is a price level or zone where a falling market has repeatedly stopped and bounced, because buying interest has tended to appear there.
Example
If AUD/USD drops to about 0.6500 several times and recovers each time, traders treat 0.6500 as a support zone.
In detail
Support is the chart's floor. At these levels, buyers have previously found the price attractive, sellers have taken profit on short positions, or both. Because many traders watch the same levels, support can become self-reinforcing for a time.
Like resistance, support works best as a zone a few pips wide, not a single precise number.
Common sources of support
- Previous swing lows
- Psychological round numbers, such as 1.0500 or 140.00
- Broken resistance levels that later hold as support
- Rising trendlines and widely followed moving averages
- Fibonacci retracement levels within an uptrend
How traders use it
- Long entries: buying near support, with a stop below it, gives a clearly defined risk.
- Stop placement: long traders often place their stop-loss a little below support, so normal noise around the level does not trigger it.
- Breakdowns: a strong close below support suggests sellers have taken control. The broken floor often becomes a new ceiling.
Example
Assume (illustratively) GBP/USD has bounced from 1.2500 several times. A trader buys at 1.2520 and places a stop at 1.2475, 25 pips below support and 45 pips from entry. The target is 1.2655, below the next resistance.
- Risk: 1.2520 − 1.2475 = 45 pips
- Reward: 1.2655 − 1.2520 = 135 pips
- Risk-to-reward: 1:3
Placing the stop exactly at 1.2500 would have cut the risk to 20 pips, but it would sit right where many other stops cluster, making it more likely to be hit by a brief dip.
Why it matters
Support gives structure to entries and stops. Still, it is a probability, not a promise. A level that held five times can fail on the sixth, often during major news. Always size the trade so a break of support is an acceptable loss.
Last updated
Related terms
- ResistanceResistance is a price level or zone where a rising market has repeatedly stalled because selling pressure has tended to outweigh buying pressure there.
- Technical AnalysisTechnical analysis is the study of past price and volume behavior on charts to identify trends, key levels and potential trading opportunities.
- Stop-LossA stop-loss is an order that closes a trade automatically at a preset price to cap the loss if the market moves against you.
- Bear MarketA bear market is a sustained period of falling prices. In forex it describes a currency or pair in a persistent downtrend rather than a brief dip.