Support and resistance are areas of interest
Support describes an area where buying previously limited a decline; resistance describes an area where selling previously limited a rise. These are interpretations of past trading, not barriers that must hold. The selected timeframe and data source influence what the chart shows.
A breakout and a retest are different events
A breakout crosses a reference area. A retest is a later return toward it. The later event may never occur, and a return to the old level can either hold or fail. Define how far and how long price must move before using either label.
Momentum and price discovery need context
Momentum describes the direction and strength of recent movement. Price discovery above a recorded high means that dataset has no earlier higher trade. Neither term proves fair value or a favorable risk-reward relationship. Compare observations over consistent periods.
EXAMPLE, NOT A TRADE IDEA
Illustrative example
A short candle can move above a reference area while a longer candle closes inside the previous range. Describe the timeframe and rule instead of treating the labels breakout and false breakout as universal facts.
Reading checklist
- Use the same timeframe when comparing chart descriptions.
- Separate observations, interpretations and forecasts in your notes.
Questions answered
What is breakout trading?
Breakout trading is a strategy that watches for price to move beyond an important level, such as resistance, support, or an all-time high.
What is momentum trading?
Momentum trading focuses on assets that are already moving strongly. Traders try to participate while the move continues instead of predicting the bottom.
What is price discovery?
Price discovery happens when price trades in territory with little or no previous history. New ATH breakouts are a common example.
What is resistance?
Resistance is a price area where sellers previously stopped or slowed a move upward. An all-time high is one of the most visible resistance levels.
What is support?
Support is a price area where buyers previously defended the market. After a breakout, the old ATH can sometimes become support.
What is volume confirmation?
Volume confirmation means the breakout is supported by above-normal trading activity, which can make the move more credible.
What is consolidation below an ATH?
Consolidation below an ATH means price is moving sideways near the old high. This can build pressure before either a breakout or rejection.
Sources and further reading
These external resources provide general background. Order types and protections depend on the product, provider and jurisdiction.