Support and Resistance Levels
To start your education on technical analysis, let's begin with the basics: support and resistance!
- Fibonacci Trading
- How to Use Fibonacci Retracement to Enter a Trade
- Fibonacci Retracements are NOT Foolproof
- How to Use Fibonacci Retracement with Support and Resistance
- How to Use Fibonacci Retracement with Trend Lines
- How to Use Fibonacci Retracement with Japanese Candlesticks
- Using Fibonacci Extensions to know when to take Profit
- Using Fibonacci Extensions to determine the stop to lose Less Money
- Summary: Fibonacci Trading
Popular Chart Indicators
- How to Use Bollinger Bands?
- HOW TO USE THE MACD INDICATOR
- How to Use Parabolic SAR
- How to Use the Stochastic Indicator
- How to Use RSI (Relative Strength Index)
- How to Use ADX (Average Directional Index)
- Ichimoku Kinko Hyo
- Trading with Multiple Chart Indicators
- What is the Best Technical Indicator in Forex?
- Summary: Popular Chart Indicators
Use Moving Averages as Dynamic Resistance and Support Levels
Another way to use moving averages is to determine dynamic resistance and support level. The termdynamic is used because they are not your regular level of resistance or support which are horizontal
at all times, but these levels change with every price movement. This constant change of the levels
makes them harder to spot using traditional methods. Many forex traders look at moving averages
to test the resistance and support levels to determine their course of action. Though not ide
the usual support and resistance lines, they resemble them quite closely. This means that you should
not expect a bounce in price as soon as it touches the moving average. Sometimes it may go a bit
beyond before it bounces back to your favor. Occasionally, the price may dip quite considerably
beyond the moving average. What you can do in such situations is use two moving averages. When
such a situation arises, you can sell the trade in between the two moving averages to still make agood deal. This space between the two moving averages is considered as the zone by many traders.
This zone can be viewed as a zone of support or a zone of resistance depending on the trend of themarket at that moment. Since the moving averages are continually changing, you could leave them
on the graph to find out the zone at any moment and make a decision about your next move.