Moving averages can also be used to identify support and resistance levels in forex trading. The concept is that a moving average can act as a support or resistance level for the price.
For example, if the price is above the 200-period moving average, it may act as a support level for the price. Traders may use this as an entry point for long positions or as a stop loss level for short positions.
Conversely, if the price is below the 200-period moving average, it may act as a resistance level for the price. Traders may use this as an entry point for short positions or as a stop loss level for long positions.
Other commonly used moving averages for identifying support and resistance levels include the 50-period moving average and the 100-period moving average. Traders may use a combination of these moving averages to identify key levels of support and resistance.
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