What are support and resistance levels, and how do you draw them?

Why these levels exist

Prices remember. Buyers who missed a bounce at a level wait to buy there again; sellers who bought at a top want to get out at their entry price when it returns. Large orders cluster at obvious prices, so the market often pauses or reverses there. The more times a level has been tested — and the more visible it is on higher time frames — the more traders watch it.

How to draw them step by step

1. Start on the weekly or daily chart and find obvious swing highs and lows where price turned sharply.
2. Mark a zone that covers the candle bodies and most wicks around those turns, not one exact price.
3. Keep only the levels price has reacted to at least twice; delete the clutter.
4. Add round numbers — for example 2,000 or 2,500 on gold, or 170,000 on the KSE-100 — which attract orders.
5. Move to lower time frames only to time entries near the zones you already marked.

Role reversal

When price breaks clearly through resistance and holds above it, that zone often becomes support on the next pullback, and the reverse for broken support. Many traders wait for this "retest" rather than buying the first breakout candle, because false breakouts are common.

Trading the levels

Common mistakes

• Drawing dozens of lines until every price is "support".
• Treating a level as an exact number and getting stopped by a wick.
• Ignoring the trend: in a strong downtrend, support breaks more often than it holds.
• Placing stops exactly at the obvious level, where many other stops also sit.

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Frequently asked questions

Sources

1. CMT Association — Chartered Market Technician body of knowledge
2. PSX — Indices