The Moving Average Cross is a simple but very effective strategy used by forex traders based on the intersection of two standard indicators used in technical analysis, the ‘fast’ exponential moving average and the ‘slow’ exponential moving average.
We recall that the exponential moving average is a particular type of statistical moving average, calculated over a specific time interval, which assigns differentiated weights to the data as a function of the time in which they were detected, with the most recent data to which a greater weight is attributed, compared to older ones.
The strategy is one of the easiest to follow, even for novice traders, as it uses very simple indicators. Thanks to this simplicity, it is therefore easy to set stop-losses, although it is advisable to use this technique when the markets are not in a ‘flat’ phase.
The first thing to do when you want to follow this strategy is to add an exponential moving average to the graph of the traded currencies and set its period to 9 (fast average), and then add another exponential moving average by setting its period to 14 (slow average), with another color, so as to differentiate the two averages.
The profitability of the strategy stays in opening a long position when the fast average intersects, or crosses, the slow one from the bottom, and opens a short position when the fast average crosses the slow one from above. The closing of the position depends on the stop-loss set for the long positions.
If, as often happens, a cross-shaped figure is displayed before the stop-loss, the take-profit will be triggered exactly near that position.
Mon 26/08/2019 20:49