Indicators: Custom Moving Average - page 2
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The 20 pips price range moving average strategy is used with the 1 Hour and 15 minute Trading charts. On this chart time-frames we use the 100 and 200 simple moving average indicator.
Both the 1 Hour and 15 minute chart time-frames will use the 100 and 200 SMA (SMA Indicator) to determine the direction of the Forex trend.
The 1 Hour chart time-frame checks the long term direction of the Forex trend, upward or downward trend, depending on the direction of the moving averages. All trades taken should be in this direction.
We then use the 15 minute price chart to find the optimal point to enter trades. Trades are opened only when the price is within 20 pips range of the 200 simple MA, if price is not within this pip range trades are not opened.
Buy Signal - Forex Uptrend/Bullish Market
To generate Forex buy (bullish signals) using the 20 pips moving average Forex trading strategy, we shall use the 1hour and 15 minute chart time-frame.
On the 1 hour Forex chart time-frame the price of the currency pair should be above both the 100 and 200 simple moving average. We then move to a lower chart time-frame, the 15 minute chart time-frame to generate a trade signal.
On 15 minute chart time-frame, when price reaches the 20 pips range above the 200 SMA, we open a buy trade and place a stop loss 30 pips below the 200 SMA. Stop loss can be adjusted to the amount of Pips that are suitable for your risk but to avoid being stopped out by normal Forex volatility its best to use 30 pips stop loss.
A buy trade can also be opened when price touches the 100 Simple moving average, provided it’s not very far from the 200 SMA. Normally the 100 SMA will be within the 20 pips range of the 200 SMA.
Sell Signal – Forex Downtrend/Bearish Market
To generate Forex sell (short signals) using the 20 pips moving average Forex trading strategy, we shall also use the 1hour and 15 minute chart time-frame.
On the 1 hour chart time-frame, the price should be below both the 100 and 200 simple moving average. We then move to the 15 minute chart time-frame to generate a Trading Signal.
On 15 minute chart, when price reaches the 20 pips range below the 200 SMA, we open a sell trade and place a stop loss 30 pips above the 200 simple moving average.
With this method price will generally bounce of these levels because many traders watch these levels, and open similar trades at around the same point.
These levels act as short term resistance or support levels within the currency price charts.
Profit Taking level For This Trading Strategy
With this trading strategy the price will bounce and make a move in the direction of the original Forex trend. This move will range from 70 - 100 pips.
The best profit taking level would therefore be considered to be 80 pips from the 200 simple moving average.
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newdigital, 2014.06.05 09:41
USDCHF Breakout Hindered by 200-Day Moving Average (adapted from dailyfx article)
The 200-Day Simple Moving Average
The 200-Day Simple Moving Average is one of the most popular indicators in the world. When price breaks through a 200 MA on a daily chart, it can often be seen as a topic of conversation on financial news stations, websites and newspapers.
It is primarily used to give traders and investors an overall sense of how strong or weak a currency pair is.
Typically, when a currency pair’s price falls below the 200 Day MA, it is a sign of weakness with a potential for further price decline. And when a currency pair’s price breaks above the 200 Day MA, it is a sign of strength with a potential for further price increases.
The chart above shows the recent price action surrounding the 200 Day MA. We see a large run up in price breaking through multiple resistance levels until it met this powerful MA line. We have had 6 consecutive days where price has temporarily broke through the 200 Day MA or price has come within 10 pips of the line before retreating lower. So this level is acting as strong resistance.
If price were to remain below the MA, it could propel it lower back into the pair’s price channel. However, a breakout to the upside could add yet another reason to buy the USDCHF. Until we witness a larger price move, we are in a state of limbo.