The bounce strategy off support and resistance levels is built on logic opposite to breakout trading: instead of expecting a level to break, a trader bets that price will reverse as it approaches, just as it has done repeatedly in the past. It's one of the most intuitive strategies for beginners, since it relies on clear visual landmarks on the chart.
The logic behind the bounce
A support or resistance level marks a zone where demand or supply concentrated enough in the past to reverse price. On a repeat approach to such a level, part of the market reacts the same way again: buyers step in at support, sellers at resistance, producing a bounce. The more times a level has held in the past, the higher the expected probability of another bounce — but that probability drops with each new approach, since the level gradually "wears thin."
How to choose a level for the bounce strategy
Levels with certain characteristics suit bounce trading:
- A clear history of being touched in the past without a clean breakout.
- Alignment with longer timeframes — a level visible on both the hourly and daily chart is more reliable than a purely local one.
- No significant news likely to trigger a breakout on this particular approach to the level.
- Slowing momentum as price nears the level — deceleration often precedes a reversal.
Confirming a bounce before entry
Entering right on the touch of a level is risky without further confirmation. It's sensible to wait for one of these signals:
- A reversal candlestick pattern — a hammer, pin bar, or engulfing candle — forming right at the level.
- An oscillator diverging from price, pointing to weakening momentum.
- Falling trading volume as price approaches the level, suggesting weaker pressure toward a breakout.
- No candle closing beyond the level — if price closes past it, the odds of a bounce drop.
Risks of the bounce strategy
The main risk is the level finally breaking after a string of successful bounces in the past. That's why it helps to pair the bounce strategy with a stop rule: if price closes beyond the level on noticeable volume, skip the bounce trade — the market has likely shifted into breakout mode. These two scenarios are compared in the article on the breakout strategy.
Bounces across different timeframes
On short timeframes, bounces happen more often but are less reliable due to market noise; on higher timeframes there are fewer signals, but each carries more statistical weight. For short-expiration binary options, a reasonable compromise is to find the level on a higher timeframe and fine-tune the entry on a lower one.
Automating the bounce strategy
Calculating price's distance from a level, its approach speed, and confirming candlestick patterns can be automated. A trading robot for Pocket Option can find such conditions against set parameters with no human involvement — details on the features page.
Conclusion
The bounce strategy suits traders who prefer visually clear signals and well-defined entry points. Choose levels with a track record of holding, wait for an additional reversal signal, and be ready to skip a trade when breakout signs appear. Automatic calculation of suitable conditions is available in the robot's plans.