Using Moving Averages to Place Stop-Losses

08/26/2008 12:00 am EST


S. Wade Hansen

Co-Founder, Profiting with Forex (PFX) and Learning Markets

Many forex investors are uncomfortable trying to identify support and resistance levels on their own. They find themselves examining different price levels and saying, "Well, support could be right here. On the other hand, it might be right here. Then again, it could be right here." If you are someone who doesn't feel comfortable identifying support and resistance, or if you are someone who just doesn't like using arbitrary support and resistance levels to set your stop-losses, don't worry. You have a lot of options available to you.

One option is using a moving average to help you determine a concrete support/resistance level that you can use when determining where to place your stop-loss. Once you have placed your moving average on your chart, you can set your stop-loss just below it if you are long a currency pair, or just above it if you are short a currency pair. Of course, you do have to decide how far above or below to set the stop-loss, and what time frame to use on your moving average, but we'll talk about that in the accompanying video (see link below).

Because moving averages, by definition, follow price movement, using a moving average to help you set your stop-loss is similar to using a trailing stop-loss. The one exception is you have to update your stop-loss manually when using this methodology, while a trailing stop-loss automatically adjusts.

Click here to watch the video.

By Wade Hansen of

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on STRATEGIES

Keyword Image
MSG Networks: A Sporting Chance
12/12/2018 5:00 am EST

Validea is an advisory service which assesses stocks based on the investing criteria of many of the ...