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Chapter 11, Part VI. Trading moving averages crossover. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 18, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: And today we will talk about this – using a crossover of MAs as a trading strategy. In general, this strategy includes the following points:

    1. Plot two different by period value MAs on the chart. One MA should have a shorter period value than the other. Periods to choose depend from your own trading style, particular pair, time frame and your own analysis of the suitability of the particular types of MAs and their periods;

    2. When the MAs cross over each other – it could be a signal of trend shifting. Specifically:

    - If the short term MA crosses the long term one from below it and exits above it – the trend turns bullish;

    - If the short term MA crosses the long term one from above it and exits below it – the trend turns bearish.

    Here is how it looks on a chart:

    Chart #1 AUD/USD Weekly - 7 SMA (blue) and 15 SMA (green)
    [​IMG]

    So, crossing of MAs could tell you, that possibly the trend is close to an end. This could let you to open a position in the direction of the new trend at a better price.

    Chart #1 shows an application of this method on an AUD/USD weekly chart. The blue line is a 7 period SMA and the green line is a 15 period SMA. If you have applied this crossing strategy on this chart, their initial cross put you in flawless down trend and you were absolutely happy with that. Always you are happy at any points, where I post on the chart “Buy” or “Sell”, because there is an excellent trend that is followed after these points. Also, take a note, how this combination of two different MAs keeps multiple fake outs without the trend shifting. Amazing!
     
    #1 Sive Morten, Dec 18, 2013
    Lasted edited by : Mar 12, 2016
    Hamza Samiullah and fran alvarez like this.
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