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Dynamic Support and Resistance

Dynamic support and resistance

We have discussed in previous posts about horizontal support and resistance, how to draw it. We also discussed how a gap can act as support and resistance in previous post. Today we are going to discuss about dynamic support and resistance.

What is dynamic support and resistance

Dynamic support and resistance are not like horizontal support or resistance. They are constantly changing. We can use moving averages as dynamic support and resistance. We have done some videos about moving averages. You can check those videos in our channel.

You might have noticed price bouncing once it touches a major moving average from upside. Same thing happens when price rise and touch a major moving average line below. In the image below moving average acts as support each time price goes down and bounces from there.

                                     

Consider as zones 

As I said in previous posts, always consider support and resistance as zones, not a fixed point. These can be considered as areas of interest for buyers and sellers and it wont be an exact point. It will be a zone or area. In the image above itself you can see price going through moving average a bit and coming back. 

Watch video below from our channel share market Malayalam to know more about this.



Moving average trading strategy


We can use this concept to make trading strategies. You just need to select right moving average based on your trading duration and back testing. I personally use 20 EMA or 50 EMA for trading. You can back test yourself and find best combination based on your trading style.

I have said earlier that sometime price may go through moving average and comeback. Considering this some traders use a combination of two moving averages and consider zone between them for buying or selling of shares.
Eg : a combination to 10 and 20 EMA. They buy when price reverses from a zone between them.


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Support Resistance role reversal

As in the case of horizontal support and resistance dynamic support resistance also reverses its role. Moving average once acted as support is broken, it acts as resistance and vise versa. You can see that in image given below. Moving average which was acting as support till its broken. Once its broken and when price retraces it started to act as resistance.




Check All posts in support and resistance series 

We have done 4 videos about support and resistance. I will update this list once I add more.


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