The Price Action S&R Strategy is one of the most widely used and effective trading methods in technical analysis. It relies on identifying Support and Resistance (S&R) levels and using pure price action to anticipate how price is likely to behave around them. This strategy removes the clutter of indicators and focuses solely on what the market is telling you through candles, structure, and reaction points.

Understanding Support and Resistance

• Support is a level where price tends to stop falling and reverse upwards due to increased buying interest.
• Resistance is a level where price tends to stop rising and reverse downwards due to selling pressure.

These levels form due to collective market memory. Traders remember these zones and act on them when price returns.

Support and resistance can be found at:

• Previous swing highs and lows
• Round numbers (e.g. 1.3000, 150.00)
• High-volume areas
• Historical breakout and breakdown levels

Why Use Price Action Instead of Indicators?

Price action reflects the real-time psychology of the market. By observing how candles form and react at key levels, traders gain direct insight into momentum, indecision, and reversals—without delay or lag.

This strategy works best when you’re trading clean charts, using only the S&R levels and price behaviour to guide your decisions.

How to Identify Key Support and Resistance Levels

1. Use Higher Timeframes (H4, Daily, Weekly)
Draw lines where price has consistently reversed or consolidated.

2. Look for Repeated Tests
A level that has been tested multiple times is more significant. Three or more clean touches increase reliability.

3. Wick and Close Analysis
Use both the wicks and candle bodies for drawing your zones. A good level often aligns with multiple wicks or closes.

4. Use Horizontal Lines or Zones
Mark zones rather than exact lines—price rarely reacts to a specific pip.

Entry Techniques at Support & Resistance

To enter trades using the Price Action S&R Strategy, follow these steps:

1. Wait for Price to Reach a Key Level
Never trade away from support or resistance—wait for price to test it.

2. Observe the Reaction (Rejection or Breakout)

• Rejection: Look for pin bars, engulfing candles, or inside bars.
• Breakout: Watch for strong momentum candles breaking and closing beyond the level.

3. Enter with Confirmation

• Reversal Trade: Enter after a rejection candle confirms a bounce.
• Breakout Trade: Enter on a retest of the level after a breakout.

Stop Loss and Take Profit Placement

• Stop Loss:
  • For reversals: Place just beyond the S&R zone to avoid stop hunts.
  • For breakouts: Place below the breakout candle (support) or above (resistance).
• Take Profit:
  • For reversals: Use the next key level.
  • For breakouts: Measure the previous range or use a fixed reward-to-risk ratio (e.g. 1:2 or 1:3).

Example: S&R Reversal on AUD/USD

• On the daily chart, price tests a long-standing resistance at 0.6650.
• A shooting star forms with a long wick rejecting the level.
• On the 4H chart, confirmation comes with a bearish engulfing.
• Sell entry at 0.6630
• Stop loss at 0.6665
• Take profit at 0.6540
• Risk-to-reward: 1:3.1

Key Candlestick Patterns to Watch

• Pin Bar / Rejection Candle: Long wick rejecting the S&R zone.
• Engulfing Candle: A strong reversal signal when the body engulfs the previous candle.
• Inside Bar: Consolidation at the level—watch for breakout direction.
• Doji / Spinning Top: Indecision—wait for confirmation before acting.

Tips for Success with the S&R Strategy

• Use Confluence: Combine S&R with Fibonacci levels, trendlines, or round numbers.
• Check Market Structure: Is the market trending or ranging? S&R bounces work better in ranges; breakouts in trends.
• Look Left: Always scan the chart’s history for untested levels or previous reactions.
• Be Patient: The best trades come to you—don’t force entries.

Common Mistakes to Avoid

• Trading every touch of support/resistance without confirmation
• Ignoring the higher timeframe trend
• Using levels that haven’t been respected in the past
• Entering mid-range with no nearby S&R

Conclusion

The Price Action S&R Strategy is a cornerstone of technical trading. It’s simple, powerful, and works across all markets and timeframes. By mastering how to read support and resistance zones and observing how price reacts at these levels, traders can capture high-probability moves with tight risk and high reward.

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