The entry criteria is likely to vary among traders as this comes down to trader preference. In this example, the bullish bias was established through price trading above the 200 DMA with a rebound offTherefore, look for price above the 200 DMA to get a feel for the trend and then make use ofOnce the trend has been confirmed, it is important to manage the trade as time goes on. Ideally, traders seek to remain in the trade as long as the trend continues.
The 200 DMA can be used as ‘dynamic support’ during uptrends. The trend remains in force as long as price continues to trade above the 200 DMA. A move below the 200 DMA could signal that the trend is slowing down or in fact, reversing. At this stage traders can consider potential exits if the limit has not yet been triggered.Like all indicators, there are conditions when moving averages thrive and others where they aren’t as useful.
We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Information presented by DailyFX Limited should be construed as market commentary, merely observing economical, political and market conditions. This information is made available for informational purposes only. It is not a solicitation or a recommendation to trade derivatives contracts or securities and should not be construed or interpreted as financial advice.
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