Dynamic support and resistance is a great tool used by traders to take great advantage of the market trend. It shows more entry and profit making positions than the regular horizontal support and resistance we all know.

The Dynamic support and resistance makes use of Movings Averages (MA) not just all Moving Averages, but specific type of Moving Average called Exponential Moving Average (EMA).
EMA gives a clear support and resistance levels in a diagonal manner.

Dynamic Resistance on a chart

The screenshot above shows a 1 minute chart of BTCUSD where price was influenced by EMA. There was actually a downward movement of price but when the price touched the EMA, it changed direction to an uptrend

Dynamic Support on a chart.

The screenshot above is a 1 minute chart of BTCUSD where price respected EMA by changing direction from uptrend to downtrend.

Trade Entry and Exit criteria for both buy and sell positions using the Dynamic Support & Resistance Strategy

I will be explaining some entry criteria which is of great importance while trading using EMAs as Dynamic Support and Resistance.

Sell Entry Criteria.

• It is very important to add at least two EMAs as one EMA might not really be enough to give a clear entry. So I will be using the 12 and 40 EMAs, faster and slower respectively.

• Price charts should be seen below the two added EMAs to be certain of a clear downtrend

• Price chart should get so close to the 12 EMA and touch or possibly cross the 12 EMA but patience is needed here as pull back will give a good sell entry advantage.

• After price has gotten close and touched or cross the 12 EMA, waiting for a downward oscillation of price is of essence.

• When the price is seen right below the 12 EMA, then a sell entry

Buy Entry Criteria

• Two EMAs should be introduced to the chart as they will serve as the Dynamic Support and Resistance.

• Price must be seen hovering above the two added EMAs.

• Price chart should touch or possibly cross the 12 EMA but patience should be employed too as pull back will give a good buy entry.

• When price is seen touching or crossing the 12 EMA, a rebound should be seen first before entry.

• A buy position can then be entered after the price is above the 12 EMA.

Exit Criteria for a Buy position using the Dynamic Support & Resistance Strategy

• Even though the EMAs are good trading mechanisms, it is of great importance to make good use of stop loss as the trade may always go against the wish of the EMAs.

• Stop loss shouldn't be placed just anywhere. It should be placed right below the 12 EMA just in case the trade goes against us.

• Take profit is as important as stop loss. So using the Dynamic resistance and support strategy to trade, take profit should be employed as well.

• Risk-reward ratio of 1:1 is recommended while trading with Dynamic Resistance and Support strategy.

Exit Criteria for a Sell position using the Dynamic Support & Resistance Strategy

• Stop loss should applied just in case the trade goes in a non-desired direction.

• The stop loss placed right above the 40 EMA.

• Take profit should also be placed should the trade go in favor of the trader.

• Risk-reward ratio of 1:1 is recommended for this type of trading strategy.