Do Moving Averages Actually Work as Support and Resistance?

Testing if moving averages act as support and resistance. We use Bitcoin on a hourly time frame as an example. We find that the price tends to bounce off of moving averages between 55%-65% of the time depending on the look back used. A simple trading strategy can be built from these results by taking a position as the price touches a moving average, anticipating a bounce. The number of bounces on moving averages are shown to be significant and not a result of noise via a Monte Carlo permutation test.

I did not show it in the video, but exponential moving averages also have significant bounce percentages. But they appear to be slightly weaker than then the simple moving average.

Paper: papers.ssrn.com/sol3/papers.cfm?abstract_id=888805




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