Tuesday, October 21, 2014

Forex Moving Average Crossover Strategy

July 28, 2010 by  
Filed under Fx Tutorial


When it comes to moving average, I bet most of you will be pretty familiar with this indicator. However in this post today, I will be sharing with you how I trade the moving average crossover and hope that you can have another strategy in your trading arsenal.

Below are the indicators that you need in order to trade the moving average crossover

As usual, I will not specific the time frame to trade this strategy as it is applicable to any time frame you are interested to trade in. This method can be used in short term, medium term and long term trading.

One thing to let you know is that if you are going to trade this strategy on a higher time frame, you will have to be able to withstand higher stop loss.

Here are how I trade the moving average crossover:

1) Look for entry opportunity – When you are trading this strategy, you should be waiting for the 20 EMA to crossover the 50 EMA. If you see the 20 EMA crossing above the 50 EMA, you are looking to enter a LONG trade and if you see the opposite, you are looking for a SHORT trade. However you should not enter a trade once you see a crossover, you need the other 2 indicators to give you a better chance of winning. From the image below, you can see that there are times where the price will reverse and move back up after a crossover.

Crossover Example on Hourly Chart

2) Check for overbought or oversold - If you are looking to enter a LONG trade, you should check the Stochastic to see if it is oversold and started to move up. If you are looking to enter a SHORT trade, you should check the Stochastic to see if it is overbought and started to move down.

3) Verify breakout – With the above 2 signs, you should now check your MACD to see if you have a valid breakout.

With all the above 3 indicators showing the same signs, it is time for you to enter your trade. However there are times where you will experience losses even when all the indicators are showing the same signal. As a trader, you have to understand that losing is simply part of the game.

I hope that you find this strategy useful and eventually add it to your trading arsenal. Please try this out on a demo account until you are able to trade profitable with it before moving into live trading.

 

Be Sociable, Share!

Comments

17 Responses to “Forex Moving Average Crossover Strategy”
  1. Mohamed says:

    Hi Kevin ;

    Really i appreciate your efforts , i am new follower to your blog also i am new Forex trader , but i like your simplicity in explaining , i have a question regrading the above strategy , if i will use the 15 minute time frame , what is the suitable take profit and stop lose points for this strategy ????

  2. satish says:

    Hi Kelvin
    When trading with 20 and 50 EMA moving average, what
    Is the best time to trade with on major currency
    Pairs.

    • Kelvin says:

      Hi Satish

      The best time will be around the Asian open, london open or new york open as they usually provide more movement.

  3. ANIVAL FERNANDEZ says:

    Hi Lee by this way I definitely highly recommend your course.Apart of that your experience.Im practilly an old trader where during 4 years Ive been fighting the market.Ive even did a course on trading forex and up to now my eyes where really open.I feel now that I was trading blind folded and not only I feel it but I was trading blind folded.So by this way I appreciate your time and dedication to give us this gift.Gift because for the price it is definitely its a gift.Thanks and God keep Blessing you and yours too.Ill be looking forward to meet on person some day.Thanks again.

  4. ajmal says:

    i losst my money in forex i need help in forex if you can help me free pleas help me and save my life

    • Kelvin says:

      Hi Ajmal

      You need to start learning and put in effort on your demo for at least 3 to 4 months. Spend some time to learn through this blog and then pick a strategy to use and practice with it. There is no short cut to make money from forex.

  5. sriyanto nugroho says:

    how to put his stop loss? if 30 points or 20 points? for GBPUSD

    • Kelvin says:

      Hi Sriyanto

      Just to check with you what do you mean by how to put the stop loss? Are you referring to where to place them?

  6. Jaspreet says:

    Hi Kelvin, thanks for sharing your strategy.

    Question – what signal on MACD are you referring to here – “check your MACD to see if you have a valid breakout.”

    Is this the MACD-Signal Bull Cross (on which side of 0?), or the MACD-Zero Line Bull Cross, or just MAD>Signal (which side of 0?).

    Thanks.

  7. Leonardos says:

    I have applied this strategy on the AUDUSD daily chart.I have 2 contradicting signals;the first is the crossover of the 20 ema above the 50 ema indicating that its time for a short position.The second is when I get this crossover,the stochastic doesnt indicate overbought conditions.
    However if I had entered this trade it would have been profitable.
    Therefore,I think the stochastic creates a confusion.Don’t you think?
    Look forward to your reply and thank you.

    • Kelvin says:

      Hi Leonardos

      This is pretty common in trading. As a trader, we will rather miss out a trade than get into a trade with higher chance of losing. Personally, as long as there is no setup that are according to my plan, I will give it a miss. The key to trading lies in your winning probability and you should always get into trade with the highest probability only.

  8. Chris says:

    Hi!
    I’ve found your site and quite simple system that I’m greatful for.
    I’ve backtested it on my MT4 platform and EUR/USD chart at different time frames and I’ve spotted that there is almost any case when all indicators shows the same in one moment. Is it ok to enter a trade when I have first oversold stochastic, then MACD crossover and EMA crossover eventually?
    BTW. Thank you for your website and explanation all of this stuff.

    • Kelvin says:

      Hi Chris

      That will be possible but your trading opportunity will definitely be lower as you need more alignment but it will definitely be more accurate.

  9. Rockdrop says:

    I’m following your 10 and 20 EMA setting in another post Kelvin.
    So far it gave me an early signal in the 30 minute chart. I opened a long 6 hours and 30 minutes ago and now I’m in an uptrend in my 1H chart. I think I’ll stick with 10 and 20 EMA. :D

Speak Your Mind

Tell us what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!