Market can be trending,it can be ranging or it can be consolidating. Trend can be highly profitable. In currency markets, trend once started can last for years. But the truth is most of the time, the market is not trending. It is only ranging. This can be something like more than 70% of the time. So most of the time, you will be doing range trading.

Support is the level when buyers start buying considering the price to be low and attractive. Resistance is the price level when sellers start to sell thinking that the price has become too high and it would be dangerous to continue holding the position. If support and resistance were to hold forever, this would make trading an easy game. We would be trading easily as price ping pongs between two levels. This would make trading indeed very simple. But this is a wishful thinking.

Now, for the support to hold, price action should bounce back up from it a number of times. What this means is that the support holds as long as the price action bounces up from it. Now this happens because there are buyers in the market who consider support to be an attractive price for buying. Now these buyers can be institutional buyers like the hedge funds,large banks, money management funds, pension funds or other institutional investors or even small individual traders like us!

Now, what this means is that these traders have been rewarded a number of times when they entered into a long position on the support level a number of times. So they are doing it repeatedly. In other words, the market is rewarding them repeatedly and they have been conditioned by it. But when one day when the price breaks through the support, most these traders find their stop loss tripped. This way they are out of the market when the market did not bounce back from the support as their stops are placed just underneath the support level. But some traders who have been over optimistic about the support and didn’t place any stop loss will experience moments of anxiety.

So they quickly close their positions to stop the losses from mounting. If too many traders sell at this level, this makes the former support into the new resistance. This is how support becomes resistance.