Moving averages crossover strategy

This is another strategy thatt is based on moving averages which is easy to follow. Please also, do not follow any strategy that says it is holy grail because there is no such thing and also do not buy anything that says will make you rich over night. Let us rather take a look at this beautiful simple system. It uses EMA (Exponential Moving Averages) with certain periods: 10, 25 and 50. Signal to when you can start thr trade is when the 10 period of EMA crosses or goes through the period of 25 EMA and 50 EMA, it has to go through both of them. Based on that, if it goes through them on the uptrend we trade a call and if it goes through it on downtrend we trade a put.

HOW THIS STRATEGY WORKS

You have now a basic outline how this strategy might work but let us take a look at details so you will not get confused, here are the exact settings needed in order to execute the trade based on this strategy. First thing you need to do is to open metatrader 4 and give in the indicators written below. You can use it for any currency pair. It should look like this:

moving averages example

TIME FRAME: 15 minute or 1 hour chart
INDICATORS TO USE: 10 EMA, 25 EMA and 50 EMA

ENTER THE TRADE:

  • CALL:
    • When 10 EMA goes through and crosses 25 EMA and also 50 EMA in uptrending.
    • Wait for a candle bar to close over 50 EMA for a clear signal.
  • PUT:
    • When 10 EMA goes through and crosses 25 EMA and 50 EMA in downtrend.
    • Wait for the candle bar to close over 50 EMA to avoid false signal.

Now we have everything in order. Patience is the key here to wait for the right moment, for the signal to show. You have to meet with the criteria we have outlined and act accordingely. This is how they look.

moving averages strategy

WHY IS THIS STRATEGY BAD AND WHY GOOD?

You have to know this is not trend following strategy but is basicly the opposite since you make the entry when there is change of the direction if you check correctly. But if all is executed as it should be, from teh point of entry in the trade, you are in the trend following direction. Problem is that it can happen to fake the signal that is why it is important to follow the rules and make sure you execute it only when the tiem is right and not before. And do not use the system with low volatility since it will be to no use. It is good since it is simple to follow since it only uses three moving averages and it is not really some sort of rocket science when it comes to it. It can return you with big profits if you know how to be dsciplined. If you see that the trade will go against you, you can use the feature that is supported by binary options brokers which is called close early and you get some money back, so you do not get maximum loss.

FINALE

I can already say you will get a few losses but keep your head straight and you will profit in the long run. As i always say, there is no perfect strategy out there, only good  and clear system and good money management can help you that is why you need to learn this, no shortcuts.

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