Before we start!
If you still havenβt read my Moving Average guide part 1 please click below and do so before reading this one.
You will learn the basics about spotting trends and trend reversals with Moving Averages.
If you still havenβt read my Moving Average guide part 1 please click below and do so before reading this one.
You will learn the basics about spotting trends and trend reversals with Moving Averages.
This guide will cover:
- Using Moving Averages as key levels of support/resistance
- What MAs work more often than others and why MAs work at all
-I will give you the exact MA trading setups I use/used so you can learn and copy and print money
- Using Moving Averages as key levels of support/resistance
- What MAs work more often than others and why MAs work at all
-I will give you the exact MA trading setups I use/used so you can learn and copy and print money
Firstly letβs cover the question of: Why do moving averages work at all?
The very short answer is market-makers, quant trading algorithms, liquidation engines, different trading bots and of course market participants.
The very short answer is market-makers, quant trading algorithms, liquidation engines, different trading bots and of course market participants.
Without going too in depth just understand that the majority of assets have some form of one or several market-makers, algorithmic trading bots, arbitrage bots etc running and trading on them.
Many of these use moving-averages as one of the leading calculations in their strategies to determine where to bid/ask/buy/sell.
Does the length of the MA matter?
Yes and no, here is why.
If you are using MAs to spot trends/trend reversals the length does not matter. There is no difference between MA 99 and MA 100 etc
However length does play a role if we want to use MAs to find key areas of interest
Yes and no, here is why.
If you are using MAs to spot trends/trend reversals the length does not matter. There is no difference between MA 99 and MA 100 etc
However length does play a role if we want to use MAs to find key areas of interest
This is because we want to use the most commonly used MAs - which are again used by algorithms/market participants.
In addition to using moving averages to spot trends and trend reversals like I taught you in my previous guide we can also use them as key levels of resistance/support.
I will show you how but first I need to teach you a few concepts.
I will show you how but first I need to teach you a few concepts.
Concept 1: The angle of a moving average. I touched on this in my previous guide, please study it before reading further.
As we remember MAs can either be flat or in a uptrend or downtrend.
As we remember MAs can either be flat or in a uptrend or downtrend.
When an asset is in an uptrend (price is trading above all key MAs and MAs are following price at an uptrend angle) we can keep bidding key MAs to buy retraces until MAs start turning flat.
When the MAs start turning flat we know that the uptrend is coming to a halt or end.
When the MAs start turning flat we know that the uptrend is coming to a halt or end.
Concept 2: The more times price taps an MA the weaker it becomes
As with support and resistances, the more times they get retested the weaker they become
First tap of a support is followed by the strongest reaction from buyers. The 2nd retest will be weaker n 3rd might break
As with support and resistances, the more times they get retested the weaker they become
First tap of a support is followed by the strongest reaction from buyers. The 2nd retest will be weaker n 3rd might break
- Basically after a bullish trend starts we want to be bidding the first highest untapped MA. I will show you my favourite setups
- After a bearish trend starts we want to be doing the same thing except we want to be selling/shorting
Let's make money with what we just learned!
- After a bearish trend starts we want to be doing the same thing except we want to be selling/shorting
Let's make money with what we just learned!
Example:
My favourite MAs to buy retraces on after a bullish trend starts:
- SSMA 7
- SSMA 25
- 100 MA
- 200 MA / 200 EMA combo
Timeframes: 4H, 12H, 1D, 1W, 1M
My favourite MAs to buy retraces on after a bullish trend starts:
- SSMA 7
- SSMA 25
- 100 MA
- 200 MA / 200 EMA combo
Timeframes: 4H, 12H, 1D, 1W, 1M
Example of a simple strategy you could use if you are a swing trader.
- We caught a bull trend late. We bid and buy SSMA 25 1D retests
- We exit with a loss if one or several 1D candles close under 25 SSMA
- We ride the trend till 25 SSMA 1D turns flat
- We caught a bull trend late. We bid and buy SSMA 25 1D retests
- We exit with a loss if one or several 1D candles close under 25 SSMA
- We ride the trend till 25 SSMA 1D turns flat
Mac, how do I know when to change timeframes - when do I switch from a 1W timeframe to 1D etc?
Good question.
Zooming in on lower timeframes is useful to find entries as the lower timeframe MAs get retested more.
A 4H 200 MA will get retested more than 1D 200
Good question.
Zooming in on lower timeframes is useful to find entries as the lower timeframe MAs get retested more.
A 4H 200 MA will get retested more than 1D 200
Zooming in can help us find next areas of support.
Let's say price lost and started trading under 4H MA 200, we can switch to 12h, 1D or even 1W to find the next support levels
Let's say price lost and started trading under 4H MA 200, we can switch to 12h, 1D or even 1W to find the next support levels
Practical example: Buying/selling at MA 200 on different timeframes
After a uptrend/downtrend starts we can usually place bids/asks at a fresh and untested MA 200 for some easy money.
Key wording here is [Fresh and Untested]!
Remember concept 2 I taught you from above.
After a uptrend/downtrend starts we can usually place bids/asks at a fresh and untested MA 200 for some easy money.
Key wording here is [Fresh and Untested]!
Remember concept 2 I taught you from above.
Example: Don't get faked out!
Always check higher timeframes for confirmation before entering trades.
- Identify all potential support/resistance levels.
Always check higher timeframes for confirmation before entering trades.
- Identify all potential support/resistance levels.
Example: Trading lower timeframe trend reversals
Often we will see lower timeframe MAs turn bullish, meanwhile higher timeframe MAs are still bearish.
How do we trade this?
1) We buy the lower timeframe trend reversal
2) We go on higher timeframes to find areas of resistance
Often we will see lower timeframe MAs turn bullish, meanwhile higher timeframe MAs are still bearish.
How do we trade this?
1) We buy the lower timeframe trend reversal
2) We go on higher timeframes to find areas of resistance
The same applies in a downtrend, just inverse!
A pro tip if you struggle to make your brain shift from a bullish trend to a bearish and vice versa, you can write 1-(ASSET NAME) in @tradingview to get an inverted chart.
A pro tip if you struggle to make your brain shift from a bullish trend to a bearish and vice versa, you can write 1-(ASSET NAME) in @tradingview to get an inverted chart.
Before we end I just want to repeat my standard MA setup:
- SSMA 7, 25, 100, 150
- MA 50, 100, 200
I will post more practical chart examples next week based on feedback you guys give me.
Experiment and try to create your own strategies with what I just showed you!
- SSMA 7, 25, 100, 150
- MA 50, 100, 200
I will post more practical chart examples next week based on feedback you guys give me.
Experiment and try to create your own strategies with what I just showed you!
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