How to Understand Support & Resistances

Supports(S) & Resistances(R) are often arbitrary (i.e. people in general don't understand where the S & R are present in the chart). But their definition is pretty simple in general, which is that these are the most probable price levels where the existing trend of the market can take a pause (Sideways market(SD)) or reverses its direction.

If the current price is above that particular price level then that price level can act as a support while if the current price is below it then it can act as a resistance.

S & R can be of different types, can be a -

1. Moving Average

2. Previous Swings

3. Supply & Demand Zones

4. Normal Distribution Volume Ranges

5. Volumetric Pivots

6. Wicks with Large Orderflow Values

These all can be calculated manually (which is obviously a tedious task) or can be computed using codes.

The relative positions of these S & R can vary depending on the previous trading sessions. For reference, see figure : 01

Fig : 01 - BANKNIFTY (3 min - 09/07/2025) ; Lines shows S & R levels

It can be clearly seen that the some levels are packed tightly to each other while some are distant. The pivots in general leads to Sideways market movement on the other hand the loosely packed pivots provides the possibility of unidirectional movement of the price values.

So, for a momentum trade (unidirectional market movement) it is advisable to trade the market in loosely packed price ranges.