Published support and resistance levels bounced 60.8% of the time in a New York Fed study, against 56.2% for arbitrary levels. The edge is real, and it is small.
Support is a price where a falling chart stopped and turned up. Resistance is a price where a rising chart stopped and turned down. Traders buy near support and sell near resistance. A candle closing beyond either one means the level broke.
The three lessons on this page teach it by doing. You draw each zone on the chart, call whether price holds at it, and watch the chart play forward to show the answer.
Do support and resistance levels work?
A little better than chance.
Carol Osler of the Federal Reserve Bank of New York took the support and resistance levels six trading firms sent their customers each morning, from January 1996 to March 1998. She tested them on the dollar against the German mark, the Japanese yen and the British pound. The quotes were taken every minute between 9 a.m. and 4 p.m. ET.
A "bounce" meant the rate was still on the near side of a level 15 minutes after touching it. Osler compared the firms' levels with arbitrary ones.
Exchange rates bounced off arbitrary support and resistance levels 56.2 percent of the time on average. By contrast, they bounced off the published levels 60.8 percent of the time on average.
That is Carol Osler, "Support for Resistance: Technical Analysis and Intraday Exchange Rates," in the FRBNY Economic Policy Review, July 2000.
| Levels tested | How often price bounced |
|---|---|
| Published by the six trading firms | 60.8% |
| Arbitrary levels | 56.2% |
The published levels beat arbitrary ones in all 16 firm and currency pairs tested. The average gap was 4.6 percentage points.
About four touches in ten did not bounce.
What do the three lessons cover?
| Lesson | What you do | What you learn |
|---|---|---|
| How to find and draw support and resistance zones | Watch a level form, draw it, call four tests | Why a zone beats a line, and what a hold looks like |
| When support becomes resistance | Pick which candle broke a level, follow one trader through a flip | What counts as a break, and why broken support often turns into resistance |
| False breakouts | Choose the zone that matters, draw one with no help, spot a false break | Which levels to keep, and how to spot a bull trap or bear trap |
Each lesson takes a few minutes and needs no sign-up. This browser remembers which lessons you finished and marks them here.
Where do the lesson charts come from?
They are generated from real Bitcoin daily price swings and shown with no ticker and no dates.
You cannot look up what happened next, so the chart is the only thing you read.
Start with lesson 1 and draw your first zone.