Support and Resistance as Pure Price Action Tools


Price action trading refers to buying or selling a currency market or a market without using any technical analysis indicators. Only with the use of trendlines, traders identify support and resistance levels where the market is most likely to hesitate.

Because brokers offer various timeframes to analyze a market, support and resistance vary in importance. The rule goes that the bigger the timeframe, the stronger the support or resistance. Hence, the more difficult for the price to break it.

Two types of support and resistance exist: horizontal and dynamic. As the name suggests, horizontal support turns into resistance when the price breaks the horizontal level.

On the other hand, dynamic levels follow the price. They move together with the price action and are more difficult to overcome.

When two or more dynamic and horizontal levels appear on a chart, the area is called a confluence area. The price will have a difficult time getting through, a confluence

How to Build Support and Resistance

The easiest way to illustrate how support and resistance work is to use examples. In this case, we use the EURUSD weekly timeframe, with no indicators on it whatsoever.

Support and Resistance as Pure Price Action Tools

The price action during 2018 so far was mixed. The market rose from the 1.20 level where it ended the previous years, only to consolidate in a triangular pattern for over two months around the 1.25 mark.

For traders with a technical eye, it was tough for the bullish trend to continue. Chances were that the market would have a hard time advancing in the same direction as the price action reached tremendous resistance.

Support and Resistance as Pure Price Action Tools

At first, the area where the recent 1.25 consolidation started, turned out to be a horizontal resistance. During the 2008 financial crisis reaction, the pair hesitated for several years before eventually broke below the horizontal support.

The logical step is that the next time it comes to support, it’ll meet stiff resistance.

Support and Resistance as Pure Price Action Tools

Second, if we draw a trendline connecting the previous lower high with the absolute high, we see a dynamic resistance coming at the same level.

Last but not least, the black trendline connects the support levels before the pair broke lower. A projection of it on the right side of the chart comes at the same resistance area.

In other words, we have a confluence area given by two dynamic resistance levels forming on top of a horizontal one. Add to this the weekly timeframe, and chances favored a rejection, rather than a continuation pattern.

Needless to say, the pair turned South, dropping over a thousand pips from the dynamic resistance. Savvy traders always put their money on the path of least resistance, and in this case, the downside was evident as they built the area using pure price action tools like horizontal and dynamic support and resistance levels.


These days, traders tend to overcomplicate things. Because trading platforms offer all kind of technical indicators, the temptation exists to use as many as possible.

However, it doesn’t mean that the forecast is more accurate. In fact, keeping things simple works all the time as the apparent areas become visible when using price action tools like support and resistance.


This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Trading Strategies

What Is Position Trading? Definition and Examples What Is Swing Trading? How to Trade in Ranges: Range Trading Strategies Forex Money Management Strategies How to Trade Breakouts

Latest articles

Financial Market News

US Government Shutdown: Assessing Economic Impact and Recession Risks

The recurring spectre of a government shutdown has once again loomed over the United States, prompting concerns about its potential economic consequences. The shutdown may occur this weekend unless lawmakers agree on spending levels and whether to give more aid


S&P 500 Analysis: Price Reaches The Edge of Abyss

Investors in the US stock market have serious reasons to worry: → The likelihood of a shutdown of government agencies is becoming more and more real. It could happen as early as next week if a budget agreement is not reached


Bitcoin Cash Analysis: Promising Resistance Breakout

Yesterday, the head of the SEC regulator, Gary Gensler, answered questions for 4 hours before the Financial Services Committee of the US House of Representatives, which, among other things, related to cryptocurrencies. What has become known: → on the eve of

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.