4 Hour Forex Trend Following Strategy With Moving Average
Here’s a great versatile trading strategy that can be used to buy and sell trend reversals or to buy dips in an established up trend or sell rallies in an established down trend.
Indicators: 200 Period Exponential Moving Average, MAAngle with default settings
Preferred time frame(s): 4 Hour
Trading sessions: Any
Preferred Currency pairs: Majors + Currency Crosses
4H EUR/USD Chart: How to enter a trade?
As the above chart illustrates, go short at the open of the next bar when the price trades below the 200 EMA and MAAangle indicator bar color brown. On the contrary, go long at the open of the next bar when the price trades above the 200 EMA and MAAngle bar color green.
In an established up trend, go long when the MAAangle bar color changes from yellow or brown to GREEN (buy dips). In an established down trend, go short when the MAAangle bar color changes from yellow or green to BROWN (sell rallies). See trading example below for better understanding of the trading concept. Click the chart to enlarge.
- Price above the 200 period moving average
- Wait for the MAAngle to change from brown or yellow to GREEN color
Execute long trade! Place stop loss below the previous swing long or 1 pip below the 200 EMA.
Price objective: Risk X 1.5 or better (i.e risking 50 pips to make 75 pips)
Alternative take profit method: Take profit at the previous swing high level (resistance).
- Price below the 200 period moving average
- Wait for the MAAngle to change from green or yellow to BROWN color
Execute short trade! Place stop loss above the previous swing high or 1 pip above the 200 EMA.
Price objective: Risk X 1.5 or better (i.e risking 80 pips to make 120 pips)
Alternative take profit method: Take profit at the previous swing low level (support).