Monday, November 10, 2014

A Look at 5 - 10 SMA Crossover Trading Strategy

5 – 10 sma crossover is a most simpletrading strategy

Using two simple moving averages tokeep track of what is happening on 30 Forex pairs saves a lot of timein inspecting charts to look for trend changes.

The Forex pairs are often offering longtrends and are lucrative for trend followers.

Using the 5 – 10 crossover scan todetect changes on the daily and the 4 hour charts offers severalopportunities in a week. Of course, it is not profitable, long term,to depend on this strategy, this is a means of seeing what may behappening to individual instruments.

Below is a chart of EURUSD dailyshowing several crosses, some of them lead to nice profits whileothers are in a choppy market or a consolidation period and may proveto be poor entries. A person will need to determine entry criteria inall cases. (The last bar on this chart illustrates the need for astop loss and trailing stop. The sudden reversal can wipe out anygains and lead to losses)

There are numerous indicators that willhelp a person determine validity of an entry. On the chart I haveshown the Ichimoku Cloud and CCI, those may or may not be of value toan individual. I would think that a trailing stop is a necessity onevery entry as reversals can come quickly.

I am providing a scan on a regularbasis to the readers in order to point out any significant 5 – 10crossovers on the daily and 4 hour charts. The lower time frameswould be unsuitable for this type of scan as the choppy periods andconsolidation periods occur far too frequently.

Takeaways re 5 – 20 crossovertrading strategy

  • Easy to keep track of many instruments
  • Simple to understand
  • Requires confirmations for marketentries
  • Unreliable for faster time frames.
  • Definitely requires a stop loss andtrailing stop
  • Can point out the beginning of long andprofitable trends

Here is a video  discussing moving average crossover trading strategy.

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