Moving Average + Price Action Trading Strategy

MA + Price Action Strategy with Example →

Hey there 👋🏼

A moving average is a simple indicator that represents the arithmetic mean of prices over the past few periods. It helps us identify the underlying trend of a stock, and determine its support & resistance levels.

Although useful by themselves, combining moving averages with price action analysis can give excellent trade signals. In today’s edition, we’ll be learning one such strategy.

Moving Average + Price Action Strategy

The idea of this strategy is to:

> Use longer timeframe moving averages to spot an underlying trend (we’ll be using 21-period moving averages to determine trends, also known as the ‘Goldilocks of Moving Averages’)

> Take an entry when a bullish pattern is seen in the daily timeframe

Here’s how you can create a long/short position according to the strategy

Long Trade:

1) The price should be above the 21-period monthly and 21-period weekly moving averages.

2) Entry can be taken when:

  • The price crosses over the 21-day moving average, or

  • A bullish candlestick pattern is formed just above the 21-day moving average

Short Trade:

1) The price should be below the 21-period monthly and 21-period weekly moving averages.

2) Entry can be taken when:

  • The price crosses below the 21-day moving average, or

  • A bearish candlestick pattern is formed just below the 21-day moving average

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Example - Long Trade in GODREJPROP

> An underlying bullish trend is confirmed as the price is seen above the 21-period MA in the monthly and weekly timeframes:

Price above 21-period MA since June 2023 (monthly)

Price above 21-period MA since April 2023 second week (weekly)

> A morning star forming near the 21-day MA on 26th June 2023, triggering an uptrend:

Note: It’s prudent to backtest a strategy on a specific stock/index before using it.

Learn how Mr. Kaushik Akiwatkar generated an ROI of 200% in 2022 with just 28 trades in his Price Action Options Trading Course.

Use “STOCK10” for a 10% discount and get the course for just ₹359 

Happy learning,
Upsurge.club

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