Candles bouncing upwards from a demand zone with 200 SMA inside the demand zone.

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In the below BTC/USD weekly chart we can see a demand zone rally base rally, and when the candles approached the demand zone, there was an instant bounce upwards from the 200-period Simple Moving Average (SMA) - candles moved towards 20 SMA.


Candle sticks bouncing upwards from 200 SMA to 20 SMA within a demand zone
Candle sticks bouncing upwards from 200 SMA to 20 SMA within a demand zone

Candles can bounce upwards from the 200-period Simple Moving Average (SMA) to the 20-period SMA within a demand zone, its a pattern indicating a potential bullish reversal. Here's how you can approach this strategy:

1. Identify Demand Zone: Locate a demand zone on your price chart. This area represents a region where buying interest is expected to be strong.

2. Plot 200-period SMA and 20-period SMA: Calculate and plot both the 200-period SMA and the 20-period SMA on your price chart. The 200 SMA acts as a long-term trend indicator, while the 20 SMA provides a shorter-term trend perspective.

3. Wait for Price to Enter Demand Zone: Monitor the price movement until it enters the identified demand zone.

4. Look for Price Reaching 200 SMA: Once the price reaches the demand zone, observe how it interacts with the 200-period SMA. Look for price approaching or touching the 200 SMA within the demand zone.

5. Observe Bounce from 200 SMA Towards 20 SMA: After the price touches or approaches the 200 SMA within the demand zone, observe for signs of a bounce towards the 20-period SMA.

6. Confirmation: Seek additional confirmation signals such as bullish candlestick patterns, bullish chart patterns, or other technical indicators aligning with the bounce from the 200 SMA towards the 20 SMA within the demand zone.

7. Entry: After observing the bounce from the 200 SMA towards the 20 SMA and confirming signals are present, consider entering a long trade.

8. Stop Loss: Place a stop loss order below the recent swing low within the demand zone to manage risk in case the price doesn't hold above the 200 SMA or the 20 SMA.

9. Take Profit: Set a target for taking profits. This could be based on a predetermined risk-reward ratio, key resistance levels, or other technical factors indicating potential profit-taking levels.

10. Risk Management: Manage your risk by sizing your position appropriately so that potential losses are within your risk tolerance.

11. Monitor and Manage Trade: Continuously monitor the trade's progress and consider adjusting your stop loss or take profit levels based on evolving market conditions.

As always, it's crucial to combine technical analysis with risk management and disciplined trading practices. Additionally, back testing this strategy and practicing it in a demo account can help validate its effectiveness before using it with real capital.

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