Day Trading – Moving Averages vs sustain and Resistance

Day Trading – Moving Averages vs sustain and Resistance

When day trading the SP and Nasdaq futures, do you rely on your moving averages more than your sustain & resistant areas?

During the first hour of trading, the sustain and resistance zones on the SP and Nasdaq futures are the most important things to watch. The moving averages have not however had a chance to come into play.

After that, if a trend is developing I watch several meaningful exponential and simple moving averages on the 2 minute, the 5 minute and the 13 minute SP and Nasdaq futures charts.

These specific moving averages give reliable sustain and resistance for the market as long as the slope of the moving averages are fairly steep, suggesting a trend. When there is no trend, the moving averages are flat and pretty much worthless.

When a trending market makes a countertrend move, and hits a meaningful moving average on two or more different time frames at the same time, the probability of a good trade setup increases dramatically. If you get three hits at the same time, it’s already better. Sometimes you’ll see one meaningful moving average get hit on the five minute SP chart at the same time another moving average is hit on the 13 minute Nasdaq chart. This also gives a good trade setup.

ultimately, a trending market will reach the next major sustain or resistance zone. At that point the zones once again become more important than the moving averages.

In afternoon trading, the market has often broken by a sustain or resistance zone several times. In that case, the zone is no longer useful, and new areas of sustain and resistance can usually be found. When I find them, I send my subscribers an RBI Intraday Update with the new sustain or resistance areas, and a description of what I think the market will do if it moves above or below them.

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