Moving Average Support and Resistance Levels
Moving Averages can be used as points of support & resistance on charts.
When price reaches the MA moving average, the MA level can act as a point of support or resistance for the market price.
Buy Trading Signal
If price is on an upward trend & starts to retrace, then most traders may wait to buy at a better price when the price touches a support level. Traders will sometimes use the MA to determine the support level.
A buy signal is generated when price hits the Moving Average, turns & starts heading in the upwards trend direction. The signal is confirmed when price closes above the MA Moving Average. Because many traders use the Moving Averages to generate trade signals, price will normally react to these zones.
A stoploss should be set just below the Moving Average Indicator. Ideally it should be set a couple of pips below the previous low.
Buy Signal - How to Trade with Moving Average Strategy
Sell Trade Signal
If the price is on a downwards trend and starts to retrace, then most traders might wait to sell at a better price when the price touches a resistance zone. Traders will sometimes use the MA to determine the resistance level.
A sell signal is generated when price hits the MA, turns and starts heading in the downward trend direction. The signal is confirmed when the price closes below the MA Moving Average. Because many traders use the Moving Averages to generate trade signals, price will normally react to these zones.
A stop loss should be set just above the moving average indicator. Ideally it should be set a few pips above the previous high.
Sell Signal - How to Trade with Moving Average Strategy
Resistance Area turns Support Level
In Forex - When a resistance zone is broken it turns into support & vice versa.
This happens when the fundamentals of a trend change and consequently the direction of a currency pair. The direction change is reflected by the moving average trading indicator, the direction is confirmed when resistance zone turns into support zone or vice versa (when support level turns in to resistance level)
Resistance Level turns Support Level - Moving Average Strategy Example
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