So, what is Support and Resistance?

When you are looking at a chart, Support and Resistance is simply a visual representation of Demand (Support) and Supply (Resistance).

In simple terms we can say that when there are more traders ready to buy an instrument (Long) than there are traders ready to sell (Short) we have an excess of Demand. When your chart registers a change in direction from down to up this is the point where that excess Demand creates the Support area.

Conversely, when price reaches a point where there are no more traders interested in buying we reach a situation where there is an over-supply in that instrument and price will start to fall. This excess of Supply creates the Resistance area.

At every stage of a move plotted on a chart you have traders all round the world trying to establish at what point price represents fair value. When the majority of the largest traders have reached a point where they reckon this has arrived you get one of the many periods of consolidation so common in any arena of trading.