Support
Price ActionA price level where buying interest is strong enough to prevent further decline. The price tends to bounce upward when it reaches support.
What Is Support?
Support is a price level or zone where demand is expected to be strong enough to halt a decline. When the price drops to a support level, buyers step in because they consider the price attractive, creating upward pressure that causes the price to bounce.
Support levels form from previous price action: prior lows, areas where the price bounced before, round numbers, moving averages, and Fibonacci retracement levels can all act as support.
How to Use Support in Trading
On EUR/USD, if the price has bounced off 1.0800 three times in the past month, that level becomes strong support. Traders watch for price to return to 1.0800 and look for bullish candlestick signals (like a Hammer or Bullish Engulfing) to enter long with a stop just below the support zone.
The more times a support level is tested and holds, the more significant it becomes. However, frequently tested support can also eventually break as buyers at that level get exhausted.
Support Zones vs. Lines
In practice, support is rarely an exact price. It is better understood as a zone (a range of a few pips to several dozen pips, depending on the timeframe). Treat support as an area of interest rather than a precise line. For more on reading price levels, see Forex Trading for Beginners.
Related Terms
Resistance
A price level where selling interest is strong enough to prevent further advance. The price tends to reverse downward when it reaches resistance.
Pivot Points
A set of horizontal support and resistance levels calculated from the previous period's high, low, and close. The central pivot, along with S1-S3 support and R1-R3 resistance levels, helps traders identify potential turning points and target prices.