Dean Cross

Home Reading the Chart

Support and Resistance

Trading Price Action with Levels, Breakouts and Stops — Tested on 3,399 Stocks Since 2002

Tired of getting stopped out right before the stock turns your way?

You drew the line. You bought at support. You put your stop just below it, like every book says. Then price dipped through your stop, took you out, and went on to do exactly what you expected without you.

Maybe you've traded levels for years. They work often enough to keep you using them, and fail often enough to leave you puzzled. The breakout that reversed the next day. The "strong" support that gave way. The textbook setup that didn't care what the textbook said.

If that sounds familiar, the problem may not be you. It may be the rules.

Buy at support. Sell at resistance. Buy the breakout. Put your stop just below the line. These rules are in nearly every trading book, course and video, but almost no one checks what actually happens when price reaches a level. This book does. It measured nearly a million touches of old highs and lows, and several hundred thousand breakouts, on 3,399 American stocks from 2002 to 2026, including more than 1,600 companies that failed or disappeared.

The result is a clear picture of how price really behaves at a level. Some of what you've been taught holds up. Support held more often than resistance, 53 times in 100. After a level held, price typically moved about three days' range away. Six breaks in ten came back to test the level within a month. Other rules fall short, and the book shows you exactly where.

What this book will help you do:

  • Stop getting shaken out by ordinary noise. A stop "just below support" was hit about 8 times in 10. Learn to set stops by how much your stock moves on an ordinary day, so a normal wiggle doesn't end a good trade.
  • Know what to expect after a break. Three breaks in four ran on at least two days' range, and about 3 in 4 came back to the level, usually within days. Once you know that, a pullback stops looking like a disaster.
  • Trade a range with realistic targets. When the range was narrow, price reached the far side about two times in three. From the bottom of a wide range, it rarely made it to the top.
  • Protect your account from the one bad trade. See why how much you risk on each trade matters more than any line on a chart, and how to size a position so no single loss can do real damage.
  • Stop wasting time on lines that don't matter. Find out which popular levels (double tops, 52-week highs, round numbers, weekly levels) turned price no more often than any nearby price.
  • See through the reward-to-risk ratio. Learn why a bigger target on paper doesn't make a better trade, and what really happens to trades planned at 3 to 1 or 5 to 1.
  • Trade with a plan made in advance. Use levels for what they do well: deciding before you buy where you'll admit you were wrong.

Written for new and experienced traders alike. If you're new to charts, Part I teaches how traders draw and use support and resistance, step by step, in plain English. If you've been trading for years and wondered why the conventional wisdom keeps letting you down, Parts II and III show how price really behaved at the lines and what to do with it. There are 50 charts and diagrams throughout.

No hype. No secret system. No promise of easy money. Just a clearer picture of what to expect when price reaches a line, so you can plan your trades with open eyes.

Part of the Reading the Chart Series. For educational purposes only; not financial advice.

Look inside

A few pages from the paperback. Select a page to see it full size.

  • The contents
  • The opening of Chapter 1
  • Figure 8.2: how often first touches held, by kind of level
  • Figure 11.1: a breakout and what followed

Who it's for

New traders learning levels from scratch, and experienced traders who have wondered why the conventional wisdom keeps letting them down.

Where to go next

PaperbackKindleHardcover