This is a really simple strategy based on one of the most popular trading indicators: the simple moving average (SMA).
This forex trading strategy suits beginners.
Indicators: 100 Simple Moving Average, 25 Simple Moving Average, 10 Simple Moving Average
Time frame(s): 30 min and above
Trading sessions: All
Currency pairs: All
GBP/JPY Daily Chart Example
- 25 SMA above 100 SMA
- 10 SMA above 25 SMA and 100 SMA
Conservative traders: Exit the trade when 10 SMA crosses 25 SMA and 100 SMA from above, this creates a valid sell trade.
For aggressive traders: close the long trade when the SMA 10 crosses below SMA 25 from above.
- 25 SMA below 100 SMA
- 10 SMA below 25 SMA and 100 SMA
Conservative traders: Exit the trade when 10 SMA crosses 25 SMA and 100 SMA from below, this creates a valid buy trade.
For aggressive traders: close the short trade when the SMA 10 crosses above SMA 25 from below.
Advantages and Disadvantages of Using Simple Moving Average Cross-over Systems
Advantages: It’s a widely used technique that always keep you on the right side of the trend. You never trade against the prevailing trend.
Disadvantages: This technique doesn’t perform very well in range-bound markets.