The 200 period EMA crossover forex strategy is a popular trading strategy that is based on the crossover of moving averages and the MA ribbon indicator.
The 200 period EMA ( 200 period exponential moving average) acts as a filter, where you can only buy when price trades above the 200 EMA line, and sell when price falls below the 200 EMA line.
The strategy works on any currency pair and timeframe.
MetaTrader4 Indicators: MA ribbon filled.89.21.ex4 (Default Setting), Moving Average.ex4 (Parameters Modified; Period=200, Style=Magenta), MACD (Default Setting)
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day, 1-Week, 1-Month
Recommended Trading Sessions: Any
Currency Pairs: Any pair
Buy Trade Example: EUR/CHF (EURO / Swiss Franc), H1 Chart
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets put on display:
- If the magenta 200 EMA Metatrader 4 indicator line crosses below the red and lime lines of the MA ribbon filled.89.21 indicator as illustrated on Fig. 1.0, price is said to be driven to the upside, thus a buy alert will suffice.
- If the silver histograms of the MACD indicator floats above the 0.00 alert level as exemplified on Fig. 1.0, bulls are said to be driving price higher, hence a trigger to go long on the stipulated currency pair.
Stop Loss for Buy Entry: Place stop loss below the magenta support line.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes precedence:
- If the magenta 200 EMA indicator line crosses above the lime line of the MA ribbon filled.89.21 custom indicator during the course of a bullish trend, bulls power is said to be diminishing, thus an exit or take profit stance is recommended.
- If the MACD indicator displays a silver histogram below the zero horizontal level during the course of a bullish trend, bulls power is said to be weaning i.e. a trigger to exit or take profit at once.
Sell Entry Rules
Enter a sell order if the following holds true:
- If the magenta 200 EMA indicator line crosses above the red and lime lines of the MA ribbon filled.89.21 indicator (checkout Fig. 1.1), price is said to be dragged lower i.e. a signal to sell the currency pair of interest.
- If the silver histograms of the MACD indicator hovers below the 0.00 signal level as depicted on Fig. 1.1, bears are said to be driving price lower, hence a trigger to go short on the currency pair of focus.
Stop Loss for Sell Entry: Place stop loss above the magenta resistance line.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes center stage:
- If while a bullish trend is ongoing the magenta 200 EMA indicator line crosses below the lime line of the MA ribbon filled.89.21 custom indicator, bears power is said to be weaning, thus an exit or take profit stance will do.
- If the MACD indicator pops up a silver histogram above the zero horizontal level during the course of a bearish trend, bears power is said to be halting i.e. a trigger to exit or take profit forthwith.
Sell Trade Example: EUR/CHF (EURO / Swiss Franc), H1 Chart
About The Forex Technical Indicators Used
The MA ribbon filled.89.21 is a custom indicator designed for the Metatrader 4 platform based on the moving average formula.
The indicator offers a simple and quick way to determine the trend direction and possible price reversals.
The 200 EMA is an exponential moving average that has its period set to 200.
It is known to reduce price lag by adding more weight to recent price.
Designed by Gerald Appel in 1979, the MACD or Mac D, as it is fondly called is a simple multipurpose tool deployed in identifying and following strong trends, while also catching trend reversals.
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