Moving Average Support and Resistance Channel

6 Sep 2021

The Moving Average Support and Resistance Channel is a channel that consists of trend lines of resistance and support of the analyzed instrument, represented as moving averages with the selected type and smoothing period on a certain timeframe, where:

- Middle Line - the middle of the channel (the moving average of the pivot point using the Floor Pivot method)
- R1 - first resistance (moving average of support + Factor*ATR)
- R2 - second resistance (R1 + Factor*ATR)
- S1 - first support (moving average of resistance-Factor*ATR)
- S2 - second support (S1-Factor*ATR)
- Factor-ATR multiplier

Despite the fact that the indicator consists of moving averages, it can work equally well both during a trend and in its absence.

Characteristics of the trend movement:
• During an uptrend, the moving averages of the indicator are directed upwards, the price is above the Middle Line level most of the time
• During a downtrend, the moving averages of the indicator are directed down, the price is below the Middle Line level most of the time
• During the flat period, the boundaries of the moving average channel narrow, the channel tends to align in a horizontal position, the price consolidates most of the time around the Middle Line level, fighting off the support and resistance levels of the indicator.

The position of asset prices outside the indicator may mean an early correction or trend reversal.

How to trade:
One of the trading methods may be that during a breakout or a pullback after a breakout of the Middle Line level, the target of further movement, depending on the direction of this movement, may be the levels R1, R2 or S1, S2. Use this situation to make a profit.

I wish you good luck in building your trading plans and remember: such indicators do not predict the future price movement on the chart, they only determine the characteristics of the price movement at the current time, taking into account historical data.