Support and Resistance Bounce Strategy

Overview

Support and resistance are the most fundamental market structures. This strategy trades bounces off these horizontal levels: buy at support, sell at resistance. The edge comes from waiting for confirmation candles rather than touching levels blindly.

Setup

• Instruments: any liquid market — forex, stocks, crypto
• Timeframe: 4-hour or daily
• Indicators: horizontal S/R lines, volume, 50 SMA, ATR(14)
• Level quality: at least 3 prior touches with clean reactions

Entry rules

1. Mark horizontal levels where price has reversed at least 3 times
2. Wait for price to return to support (long) or resistance (short)
3. Wait for a reversal candle to close at the level: hammer, bullish engulfing, pin bar
4. Confirm with above-average volume on the reversal candle
5. Enter at the next bar's open

Stop loss rules

• Stop: 1 × ATR(14) beyond the level, below the reversal candle's low (longs)
• Maximum risk per trade: 1% of account
• Exit if price closes decisively beyond the level — it has flipped

Take profit rules

• Target 1: the opposite level of the range
• Target 2: prior swing high/low
• Scale out: 50% at midpoint, 50% at the opposite level
• Minimum RR: 2:1

Risk management

Parameter	Value
Risk per trade	1% of account
Max concurrent bounces	3
Position size	Risk ÷ (entry − stop)
Level quality	3+ touches required
Volume filter	Confirm with > 1.5× average

Validate sizing with the position size calculator and the stop-loss calculator.

Common mistakes

• Buying the level blindly without a confirmation candle — price often overshoots
• Treating every prior pivot as a key level — only clean, multi-touch levels count
• Holding through a clear level break — broken support becomes resistance and vice versa

Key principle

Levels are zones, not lines. The first touch tests the level; the reversal candle confirms the bounce. Patience for the confirmation candle is the difference between profit and a bleeding account.