Since our last discussion on our previous article on the beginner’s guide to price action trading, we will now continue to tackle about other strategies that can help you in price action trading.
Now that you have learned the big picture of price action trading, understand where to place your trades on support and resistance as well as what you should do in different market conditions in the 4 stages of the market, it will be easier for you to read trends in a chart.
Today, we will talk about MOVING AVERAGES and CANDLESTICK PATTERNS.
In technical analysis, you should know that Support and Resistance are horizonal areas used in your charts. Mostly, it is plotted on ranging markets.
While Moving Averages otherwise known as DYNAMIC SUPPORT AND RESISTANCE are used in trending markets whether it’s an uptrend or a downtrend.
In moving averages, the support and resistance is moving along with the prices as new bars appear.
In a strong uptrend market, you can see that the 20-period moving average is moving with the prices and acts as a dynamic support. Here, in this example, you can see the 20 MA touching the prices. The 20 MA should also be above the 50 MA to confirm a strong uptrend.
In a downtrend, you can see the 50 MA touching the prices dynamically and acting as resistance with the 20 MA under the 50 MA further confirming a strong downtrend.