Moving Average Strategies

I would try one system one day and then abandon it for the next hot system. I don't say that lightly. Trading with Linearly Weighted Moving Average. Make sure you go through the recommended articles if you want to better understand how the market really works. Now, you could be thinking, well if we make money that is all that matters.

The moving average ribbon can be used to create a basic forex trading strategy based on a slow transition of trend change. It can be utilized with a trend change in either direction (up or down). It can be utilized with a trend change in either direction (up or down).

Moving Average – Definition

The 1 Hour chart time-frame checks the long term direction of the Forex trend, upward or downward trend, depending on the direction of the moving averages. All trades taken should be in this direction. We then use the 15 minute price chart to find the optimal point to enter trades. Trades are opened only when the price is within 20 pips range of the simple MA, if price is not within this pip range trades are not opened.

To generate buy bullish signals using the 20 pips moving average Forex strategy, we shall use the 1hour and 15 minute chart time-frame. On the 1 hour chart time-frame the price of the currency pair should be above both the and simple moving average. We then move to a lower chart time-frame, the 15 minute chart time-frame to generate a trade signal.

On 15 minute chart time-frame, when price reaches the 20 pips range above the SMA, we open a buy trade and place a stop loss 30 pips below the SMA. Stop loss can be adjusted to the amount of Pips that are suitable for your risk but to avoid being stopped out by normal Forex volatility its best to use 30 pips stop loss. To generate sell short signals using the 20 pips moving average Forex strategy, we shall also use the 1hour and 15 minute chart time-frame.

On the 1 hour chart time-frame, the price should be below both the and SMA. Trading with 1-hour or 4-hour charts is also possible, however, the bigger the time frames, the more precise the trend will be. Stop loss is set below the minimum or above the maximum of the low candle. The profit can be locked using both take profit for example, its distance can be three times or more larger than the stop loss value or trailing stop.

The Sweet Chariot is quite an old strategy. Despite the fact that the traditional version does not use any oscillators, some traders can add other tools like ADX. The Chariot works really well with the trend. However, it is only logical to use a filter to minimize the risks of entering the flat market. The EMA formula is rather complex, but, essentially, it means that a period EMA will give the most weight to the previous price values and the closing price of the 10th candle in reverse order will have almost no effect.

As a result, a line with the same period is smoother and closer to the chart, and its signals are less dependent on the large but outdated values. The only difference is that you will need to choose Exponential as the MA Method in the indicator window.

After testing and revising, this modification can prove more profitable and effective than the traditional SMA system. It is a well-known combination of a trend indicator, which determines the trend direction, and the oscillator that helps in choosing the best moment to enter the market. This strategy is suitable for any time frame, but we recommend it for short-term trading with MH1 charts.

The position can remain open until the reverse signal is received or you can set stop loss and take profit parameters. However, with WMA the weight is calculated in geometric and not arithmetic series. For example, for a 5-period MA the weight of the last price value will be 5, the one before that will be 4 and so on until it reaches 1. The WMA is set in the same way as the previous ones. The only difference is that you will need to choose Linear Weighted as the MA Method in the indicator window.

Usually, these are advanced strategies that have been developed by experimenting with and modifying more simple systems. A short position is open in the following cases:. This strategy was developed by traders from the West several years ago, and it was praised on the forums. Nevertheless, some specialists think that three WMAs 30, 60 and 90 periods are superfluous and could be removed without affecting the quality of the signals.

Traders are free to decide on how to exit the market, however, stop loss is mandatory according to all the risk management rules. This type of MA takes into account not only the price values within the set period but also some historical data. Although the priority is given to the weight of the more recent data, the historical values also affect the final results.

Smoothed moving average is set in the same way as all the previous ones: It is rarely used in any trading strategies and mainly employed in complex automated trading systems or as part of custom indicators. There are plenty of different trading strategies and approaches that use moving averages. Below are the most basic ones. This is the most basic and universal approach.

Since only one indicator is needed for the analysis, the position should be open when the price crosses the MA:. One MA can help catch a major trend, but before that, you might have to open several losing positions. That is why you have to set stop loss for each position and allow the profit to grow, thus compensating for the previous losses. This approach is similar to the previous one, but here the chart has two MAs with different parameters. The signal will be the intersection of the two MAs:.

Then again, there is another problem which is connected with lagging. It often happens that the two MAs intersect only when half of the trend is already behind.

Strategy Set-Up

A cross between two moving averages represents the most popular moving average strategy. It doesn’t mean it is the most effective one. A Forex moving average crossover strategy signals future support and resistance levels because traders buy after a golden cross and sell after a death one. Moving Average Cross Forex trading strategy — is a simple system that is based on the cross of the two standard indicators — the fast EMA (exponential moving average) and the slow EMA. You can also use our free Adjustable Moving Average Cross expert advisor to trade this strategy automatically in MetaTrader platform. Moving Average Envelope One more strategy that incorporates the use of moving averages is known as an envelope. This strategy plots two bands around a moving average, staggered by a specific percentage rate. For example, in the chart below, a 5% envelope is placed around a day moving average.