Monday, November 10, 2014

A Look at 5 - 10 SMA Crossover Trading Strategy

5 – 10 sma crossover is a most simple trading strategy

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

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

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

Below is a chart of EURUSD daily showing several crosses, some of them lead to nice profits while others are in a choppy market or a consolidation period and may prove to be poor entries. A person will need to determine entry criteria in all cases. (The last bar on this chart illustrates the need for a stop loss and trailing stop. The sudden reversal can wipe out any gains and lead to losses)

There are numerous indicators that will help a person determine validity of an entry. On the chart I have shown the Ichimoku Cloud and CCI, those may or may not be of value to an individual. I would think that a trailing stop is a necessity on every entry as reversals can come quickly.

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

Takeaways re 5 – 20 crossover trading strategy

  • Easy to keep track of many instruments
  • Simple to understand
  • Requires confirmations for market entries
  • Unreliable for faster time frames.
  • Definitely requires a stop loss and trailing stop
  • Can point out the beginning of long and profitable trends

Here is a video  discussing moving average crossover trading strategy.

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