hello everyone in today's video i will talk about a new trading strategy using 5 and 10
moving average combined with stochastic oscillator and relative strength index
if you are new on the channel please subscribe to the channel hit the like button and also
feel free to leave your comment down below just about any simple moving average trading
strategy needs a good trending market to be an effective trading strategy
once a trading chart starts showing consolidating price action the moving averages become virtually
useless although moving averages converging can help you objectively identify a market in chop
there are trading strategies that take advantage of consolidations and those are either trading the
range or using a breakout trading strategy understanding various methods of technical
analysis to identify favorable range trading conditions are something traders should learn
so they are not caught up trading consolidations when they think they are trading a trending market
this moving average trading strategy is going to focus on trading pullbacks in a trending
market and we will combine it with measures of the strength of the trend we are trading
if price is either oversold or overbought you can use this trading strategy in forex
or other markets and as either a day trading approach swing trading and even position trading
in reality the differences between various forms of moving averages will not improve a trading
strategy to any measurable result we are using simple moving averages as a matter of course and
by using the simple moving averages we will just be using the last certain day's average of price
exponential moving averages takes into account more data
than the period used although the impact of historical price data decays over time
that's why let's keep things simple and stick to the simple moving averages
time frames you can use lower time frames such as five minute charts higher time frames four
hours daily chart are my favorite time frames for trading forex currency any currency pair but stick
to the currency pairs that moves indicators 5 and 10 simple moving averages stochastic oscillator
and relative strength index setting of 9. we are using stochastic at 80 and 20 for oversold
and overbought markets and the relative strength index measure of trend strength
trend determination using moving averages the five simple moving averages is a fast moving average
and we will combine it with the slightly slower 10 period simple moving averages
when the 5 crosses the 10 to the upside we will assume we are in an uptrend when the 5
crosses to the downside over the 10 simple moving average assume we are in a downtrend this is a
nice objective way to measure the trend although using any technical indicator you will have a lag
between the price action and the indicator showing the trend change trading strategy rules as with
any trading strategy you must follow the rules or you will not find much success even better
make sure you put together a trading plan that dictates every move you will make in the markets
let's take a look at how a cell signal will show up on the chart and how you will trade the signal
step number one the first thing we look for is a crossing of the five period simple moving
average over the ten simple moving averages to the downside step number two look to see that
the relative strength index is either crossing or has crossed the 50 level which indicates the
momentum is to the downside step number three see if the stochastic has left the overbought area or
in the process and trending to the downside step number four sell right at the current candlestick
that turn the moving averages that is how you will determine a short trade and before you trade the
sell signal ensure you know where you will get out if wrong we will cover stop loss positions later
the candlestick shown as the setup candlestick may not be the one that actually turned the moving
averages by signal a by signal is the opposite of the cell signal step number one noted the moving
averages have crossed over and the five period simple moving averages is above the ten period
step number two relative strength index has already crossed over the 50 level indicating
an uptrend step number three see if the stochastic has crossed from oversold and is heading upwards
step number four place a buy order above the candlestick that turned the moving averages the
only difference between a cell signal and a buy signal is the direction the indicators must show
stop loss you have various techniques you can use for a protective stop loss one use the high or low
of the setup candlestick and place your stop below above that candlestick this is dynamic
as every candlestick will have a different range in price two use an average true range to place
your stop loss whichever method you use the key is to be consistent with all your trading setups
this is why you need a trading plan to ensure you stay on the right track as you can see this
is a simple moving average trading strategy that takes into account trend and momentum for your
trading signals ensure you use proper stop losses risk control and you find ways to take what the
market is offering without knee jerking out of your trades thanks for watching please don't
forget to like the video and subscribe to the channel i'll catch you in the next video