Moving Average Support and Resistance Levels

Moving Averages can be used as points of support & resistance on charts.

When price reaches the moving average, the Moving Average level can act as a point of support or resistance for the price.

Buy Signal

If stock index price is on an upward trend and starts to retrace, then most traders might wait to buy at a better price when the price hits a support level. Traders will sometimes use the Moving Average to determine the support level.

A buy signal is generated when price hits the Moving Average, turns and starts moving in the upward trend direction. The signal is confirmed when price closes above the Moving Average. Because many traders use the moving averages to generate signals, stock index price will normally react to these levels.

A stoploss should be set just below the Moving Average Indicator. Ideally it should be set a few pips below the previous low.

Buy Signal - How to Trade Stock Indices with Moving Average Strategy Method

Sell Signal

If the price is on a downward trend and starts to retrace, then most traders might wait to sell at a better price when the price hits a resistance level. Traders will sometimes use the Moving Average to determine the resistance level.

A sell signal is generated when price hits the Moving Average, turns and starts moving in the downward trend direction. The signal is confirmed when price closes below the Moving Average. Because many traders use the moving averages to generate signals, stock index price will normally react to these levels.

A stoploss should be set just above the stock indices moving average indicator. Ideally it should be set a few pips above the previous high.

Sell Signal - How to Trade Stock Indices with Moving Average Strategy Method

Resistance Level turns Support Level

In Stock Index - When a resistance level is broken it turns into support and vice versa.

This happens when the fundamentals of a trend change and consequently the direction of a stock indices. The direction change is reflected by the moving average technical indicator, the direction is confirmed when the resistance zone turns into support level or vice versa (when support area turns into resistance level)

Resistance Level turns Support Level - Moving Average Stock Indices Strategy Method Example