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Moving Average Bounce

By , About.com Guide

6 of 10

Wait for Price and Moving Average to Touch

Moving Average Bounce Chart

Wait for Price and Moving Average to Touch

Wait for the price to touch the moving average, which happens when the price trades at the current moving average price.

For a long trade, the previous price bars should have been making lower lows as the price approached the moving average, and for a short trade, the previous price bars should have been making higher highs as the price approached the moving average. There is no specific number of bars that need to make consecutive lower lows or higher highs, but I recommend at least 3 bars.

In the chart shown below, the price touches the moving average on the fourth bar to make a consecutive lower low.

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