Hi, From what I’ve read, I can use SMA as support and resistance. If I’m plotting 10 and 50 SMA, how can I use it as point to take profit and SL?
You can use SMA’s to trail your stops. (so set your SL below the SMA on a long trade)
In trending markets price tends to “bounce” off SMA’s
you can also use 2 SMA’s as a crossover signal:
fast crosses over slow = buy signal
slow crosses over fast = sell signal
the crossover signal works best in trending markets as you will get stopped out a lot in ranging/choppy markets.
After a while you will notice that SMA 50 acts like a really good support/resistance, especially when the price is retracing from a trend. It almost always touches or gets near 50 SMA before bouncing back the other way. Sometimes it will form triangle between SMA 50 and the other MAs, sometimes it will continue where the trend was headed.
When do you mean fast, does it means 10 SMA= fast, and then 50 SMA=slow?
yes, but it is all up to you what period you choose.
Some people use 5 and 20 period,
some people use 20 and 50 period,
some people use 50 and 200 period.
Some people even use 3 moving averages at the same time (triple crossover strategy)