In trading, you’ve probably heard the terms Support and Resistance as well as Supply and Demand. Many traders use them almost interchangeably, but they’re actually quite different concepts.
1. What is Support & Resistance?
Support is a price level where buyers tend to step in, stopping the price from falling further. Think of it as a “floor” under the price.
Resistance is a price level where sellers tend to step in, stopping the price from rising further. Think of it as a “ceiling” above the price.
These levels often come from historical price reactions — areas where the market has bounced or reversed before.
Here’s an important feature of support and resistance:
- When support is broken, it often becomes resistance.
- When resistance is broken, it often becomes support.
This happens because of market psychology: traders who bought at the old support and are now underwater might sell if the price comes back up, and traders who missed the breakout may buy when the price retests the old resistance.
👉 Explore our collection of support/resistance indicators here.
2. What is Supply & Demand?
Supply and Demand are a little different. They refer to price zones where imbalances between buyers and sellers occurred strongly in the past, often causing a sharp move away from that area.
Supply zone: an area where there was a lot of selling (more supply than demand), pushing the price down.
Demand zone: an area where there was a lot of buying (more demand than supply), pushing the price up.
These zones are more about institutional orders and unfilled positions, rather than just historical turning points.
When supply/demand levels are broken, they don't flip roles like support and resistance levels do because they are based on the actual order flow and imbalance at that price, not just psychological levels.
👉 Check out our supply/demand indicator collection here.
3. Quick comparison
| Feature | Support/Resistance | Supply/Demand |
|---|
| Definition | Historical price levels where price often reverses | Price zones where strong imbalance between buyers & sellers occurred |
| Cause | Trader psychology, market memory | Institutional orders, unfilled positions |
| Appearance | Often flat horizontal levels | Wider zones, often around sharp moves |
| What happens when broken? | Can flip roles (support ↔ resistance) | Does NOT flip (supply ≠ demand) |
| Based on | Price reaction & memory | Order flow & imbalance |
Both concepts are useful for traders, but understanding the difference helps you set better expectations and make smarter decisions.
Happy trading!
