How to use moving averages as support and resistance levels

How to use moving averages as support and resistance levels

The use of Moving Average (MA) in addition to determining the direction of the trend is to be used as a dynamic support and resistance level. Dynamic here means that the level always changes following price movements and unlike the support and resistance levels that we discussed earlier.
Lots of forex traders out there who use moving averages as a key support and resistance levels.Traders will buy when prices start to dip and test moving averages or sell when prices have reached or touched the moving average.

For more details, let’s look at an example of the movement of the GBP / USD currency pair with the EMA plot. And note that dynamic support and resistance levels are formed.

As we see that prices always touch 50 EMA to test and bounce back down. 50 EMA as if like a resistance in the price movement of the GBP / USD currency pair, this method seems okee for trading!

We can also use a combination of two moving averages to create a trading zone and some (intraday) traders will open a BUY / SELL position when the price is in the middle of both of these moving averages. For more details, please see the example below:

The following is the movement of the GBP / USD currency pair – 15 Minutes using a combination of 10 EMA and 20 EMA.

By looking at the graph above it can be seen that some time the price passed 10 EMA as many as PIPS and returned down. And this area can be used as a zone or area of ​​interest .

Breaking Support and Resistance Levels

Now you know that moving averages can be used as support and resistance levels and combining two moving averages can create a zone. And now all you need to know is that support and resistance levels can also be broken ( breakdown or breakout ).

Note that the 50 EMA is a very strong resistance for the movement of the GBP / USD currency pair, 15 Minute.

Even so 50 EMA can be penetrated (marked in the red box) and continue its reversal so that the 50 EMA which was originally a resistance level is now a support level.

How about it like and want to try it in your trading strategy!

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