How to Use Moving Averages as Dynamic Support & Resistance Levels

How to Use Moving Averages as Dynamic Support & Resistance Levels

Every trader has looked for useful ways to find the perfect support and resistance levels. They want to get to
a place where they can identify the perfect support and resistance levels for the various markets that they
trade.

The reason is because they need to know when to get in and when to get out of certain trades. It is pretty
obvious that everyone wants to try to hit their spots just right when it comes to something like this, but it is not always easy to know when to pull the trigger.

Using the Moving Averages 

The moving average tool is a good for finding baseline support/resistance levels for all markets. It is a dynamic tool that changes as the price action moves in one direction or another. This means that as the price action from the market changes, so too does the support or resistance level that has been identified. This is critical to a lot of people who want to see where new resistance and support levels are with each tick of the market.

Plenty of traders use static support and resistance levels that they draw from Fibonacci lines or some other indicator. It is useful for them to at least have some idea of where the market may meet some support or resistance, but it is not enough to draw lines like this and expect that everything will work out from there.

Instead, the best traders in the world know that they need a dynamic moving average that changes as the volume of available information changes. After all, any good trader knows that his or her hypothesis on what a trade may do next should move with the latest information in the market.

The moving average can be used as support and resistance. You just plug in the parameters you want to use on the moving average, and then allow the lines to do their work.

The longer-term moving average (the last 50-100 periods) is the best to use for this purpose as it will provide the most useful and actionable information regarding where potential support and resistance are.

You should try to look at this moving average to base where you think support or resistance are likely to be on any given market. If you do that, then you can set your trades to go off around those levels.

That is ideal as it will help you to capture as much of the movement in one direction or the other as possible without giving up too much value on any given trade.