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Some traders use moving averages as potential entry and exit points for day trading. Many
stocks will start an upside or downside trend respecting their moving averages in 1-minute and
5-minute charts as type of a moving support or resistance line. Traders can benefit from this
behavior and ride the trend along moving average (on top of moving average for going long or
below moving average for short selling).
I have been asked why moving averages are becoming support or resistance, and the answer is
because many traders are looking at these lines and making decisions based on them. Therefore,
they have a self-fulfilling prophecy effect. There is no fundamental reason behind moving
averages being a support or resistance line.
Some traders use moving averages as potential entry and exit points for day trading. Many stocks will start an upside or downside trend respecting their moving averages in 1-minute and 5-minute charts as type of a moving support or resistance line. Traders can benefit from this behavior and ride the trend along moving average (on top of moving average for going long or below moving average for short selling). I have been asked why moving averages are becoming support or resistance, and the answer is because many traders are looking at these lines and making decisions based on them. Therefore, they have a self-fulfilling prophecy effect. There is no fundamental reason behind moving averages being a support or resistance line.
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