Hi
anyone have much success using moving averages for dynamic trend lines to play the bounce trade (for uptrends and downtrends)? How many line touches b4 an entry point do you require for it to be a valid moving average trend line (don’t include the first cross through of price action)? Do you just pick a period to make the line touch the standout points as best as possible? I had a look at the charts and it doesn’t seem as straight forward as when using straight trend lines (price action doesn’t fit as easily into the m.a.). I’m not as confident with this method. Just wondering if anyone uses it successfully and what pointers they follow.
I usually watch the 200 SMA on USDJPY since it seems to be a reliable dynamic support/resistance, especially on longer-term time frames. One test of the MA preferably by a reversal candlestick or one that’s accompanied by stochastic/RSI confirmation is good enough for me to treat it as a bounce. I suggest you backtest this approach for a bit to see which time frames and pairs might be more appropriate.
I use the 200 EMA and 55 EMA, I don’t use either as a trendline, I use them mainly as support or resistance, and exit points or possible entry. One simple way to do it is, with the 200 EMA, make a support or resistance line, and see if it lines up with the 200 Ema or close to it, and if it does, it should be a strong area of reaction. So you could wait for price to hit that area and close above or below and then enter. OR if more aggressive enter on the touch of that area. Like PipDiddy said, it’s not full proof so you would need to play with it a little, but it can work! I would use it on the daily or 4h chart at least. you could also do this with the 55 EMA, but would not be as reliable as the 200, so I would look for extra confirmation.
I think the answers to the question all boil down to the individual traders. Price action should not fit in patterns you apply, it works the other way around. In the end, price action is always right.
thanks once again everybody. i’ve thought about it and it seems a little more complicated and less straight forward to implement then the other patterns where results are easy to see and test. but i hope to come back to it at some point.
Harpoon
I got good results from period 10, 20 and 30 on an 1 hour chart. Usually it just shows that trend as seen by the ordinary eye even without an indicator. The crosses are what i always look forward to because that is where you get a buy/sell signal. you can also insert the SAR for confirmation. you cal learn how to do that How to combine the Moving Average and SAR indicators | FROBET
I used 62 and 31 SMA. 62 was prompted by Fibonacci golden ratio while 31 obviously is half of it. I dropped it not because it got broken but because I found something better. While using it, imagine the two moving averages as one – a cluster. When price tests the moving average (remember, always picture them as one), you have your entry point. All you need do is wait for reversal candle stick pattern to form and either go short or long. Set SL above swing high or below swing low.There may be times when price trades in between the two moving averages, you won’t have trouble trading it as long as you see them as one. I used it on 1hr time frame and 4hr. I hope I have helped.
I am going to try this on a Demo account. But What do you think is the best time frame chart to use? Or should I stick with the one used on the video? Thanks