Index Moving Average(MA) Support & Resistance Levels Trading Strategy
Moving Averages(MAs) can be used as points of support & resistance on Indices charts.
When Indices price reaches and gets to the moving average, Moving Average level can act as a point of support/resistance for the Indices price.
Buy Trading Signal
If price is on an upwards trend and begins to retrace, then most Index traders might wait to open a buy trade at better price when the price hits a support level. Traders will sometimes use the Moving Average to identify the support level.
A buy Indices signal is derived & generated when price hits the Moving Average, turns & starts moving in the upwards market trend direction. The signal is confirmed when price closes above the MA. Because many Traders use the moving averages MAs to generate signals, price will in general react to these levels.
A stop loss should be placed just below the Moving Average Indicator. Ideally it should be placed a few pips below the previous low.
Buy Signal - How to Trade with MA(Moving Average) Strategy
Sell Signal
If the Indices price is on a downward trend and begins to retrace, then most Index traders might wait to open sell at better price when the Indices price hits a resistance level. Traders will sometimes use the Moving Average to figure out the resistance level.
A sell Indices signal is generated when price hits the Moving Average, turns & starts moving in the downward trend direction. The signal is confirmed when price closes below the MA. Because many Traders use the moving averages MAs to generate signals, price will in general react to these levels.
A stop loss should be placed just above the Stock Index moving average(MA) indicator. Ideally it should be placed a few pips above the previous high.
Sell Signal - How to Trade with MA(Moving Average) Strategy
Resistance Level turns Support Level
In Indices - When a resistance level is broken it turns into support & vice versa.
This happens when the fundamentals of a market trend change and consequently the direction of a trade chart. The direction change is reflected by the moving average Indices indicator, direction is confirmed when the resistance turns into support or vice versa (when support turns in to resistance)
Resistance Level turns Support Level - MA(Moving Average) Stock Indices Trading System Example
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