10 and 20 SMA With 200 SMA Forex Swing Trading System

The 10 and 20 SMA with 200 SMA Forex Swing Trading System Is A Very Simple Swing Trading System You Can Implement Without
Any Difficulty At All.

 

But First Lets Talk about Moving Averages…

 

WHY MOVING AVERAGES ARE USEFUL

 

There are two main reasons why moving averages are useful in forex trading:

  1. moving averages help traders define trend
  2. recognize changes in trend.

 

If  you see any forex trading strategies that have moving averages in them, the use of moving averages would be pretty much related to the two reasons given.

 

I don’t want to bother with too many details about moving averages here…so moving on.

 

THE TWO SIMPLE MOVING AVERAGES(SMA):10&20 SMA’s

 

With this swing trading strategy, when the faster SMA, 10, crosses the slower SMA 20, it often signals a trend change.

So when you see 10 SMA cross 20 SMA to the upside then you know there is a great possibility that the market is in an uptrend.

If 10 SMA crosses 20 SMA to the downside, then you know there is a great likelihood that the market is in a downtrend.

 

The 10 and 20 SMA with 200 SMA Forex Swing Trading System Trading Rules

 

  • Trading Timeframes: Stick to 4hr timeframe and the daily Timeframe.
  • After the faster 10 SMA crosses the slower SMA 20 look for these reversal candlesticksto enter your trade
  • For Selling, look for bearish reversal candlesticks and place sell stop order 5 pips under the low of that bearish reversal candlestick  for buying, look for bullish reversal candlesticksand place your buy  stop or buy stop order 5 pips above the high of that bullish reversal candlestick.
  • Place your stop loss above 5 pips above the high of the entry reversal candlestick if you are selling and 5 pips below the low of the bullish reversal candlestick if you are buying.
  • Set your take profits to 3 times what your risked or look for previous swing high/lows and use these price levels as your take profit target.

 

 

How To Use 200 SMA With This Forex Strategy

 

Now as an added measure to ensure you only trade with the main trend, the 200 SMA can be used a further filter.

  • if 10 and 20 sma are above the 200 SMA only take long positions.
  • if 10 and 20 sma are below the 200 SMA only take short positions.

 

This ensures you take trades only based on the significant or main trend which 200 SMA gives you an indication of.

 

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Posted By jeromerobeets : 31 August, 2020
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$SPY has now had an orderly six days straight of lower highs and lower lows. This is what a down swing looks like. Volume has been increasing during this swing lower in prices. Price closed under the 10 day EMA the last two trading days breaking the short term uptrend. The Overbought 70 RSI held as short term resistance on the up trend. The gap up in price from August 27th has been filled last week. The trading range continues to be tight with a 1.93 ATR that has not expanded yet. The $VIX closed above its 200 day moving average last week and the trend in the $VIX is up with higher highs and higher lows in price last week showing an expansion in fear of increasing volatility. The MACD had a bearish cross under last week. $SPY remains near all time highs in price. The next major support level is the 50 day SMA.  

Trading the head and shoulders chart pattern can be very profitable if you know how to trade it properly. In this addition to my free price action trading course, I’m going to show you a few profitable ways to trade the head and shoulders chart pattern, including the technique that I prefer to use.     The head and shoulders signal is the first long-term price action pattern that I have gone over in this free course. There are several ways to trade this, some more aggressive than others, and it’s good to know how different types of traders are likely to approach this chart pattern, regardless of the technique that you choose to use.   Note: There are bound to be other ways to trade this chart pattern, but when it comes to understanding how the majority of the retail market will trade this pattern, there are really only two classic techniques that you need to know.   What is a Head and Shoulders Chart Pattern? The head and shoulders chart pattern is a strong bearish price action pattern that occurs when the market makes the first lower high during an uptrend. The name comes from it’s resemblance to a head and shoulders, with the right shoulder being the first lower high of the uptrend.     The neckline is typically drawn off of the candle bodies of the lows after the left shoulder and before the right shoulder. In the image above, the neckline is perfectly horizontal, which is not a requirement.   When the neckline is angled upward, the head and shoulders chart pattern is considered, by some, to be less bearish. When it’s angled downward, this pattern is considered, by some, to be more bearish.   Note: I haven’t personally found the angle of the neckline to be a good indicator of the strength of this pattern. Instead, whether or not the uptrend has been an extended one seems to be a better indicator of strength in my experience.   Trading the Head and Shoulders Chart Pattern Beginning with the standard way of trading the head and shoulders chart pattern, the entry is taken when the neckline is broken. Some traders wait for a candlestick to fully close below the neckline before entering the trade. Others jump in as the neckline is broken, making sure to get into the trade before it takes off to the downside.     Your stop loss should be placed above the right shoulder of the pattern. To get your take profit, you measure, centered between the lows that form the neckline, to the highest high in the head of the pattern. Then take that same measurement, from the same starting point, and duplicate it to the downside to determine your take profit (see the image above).   The next traditional entry, which I’m calling the “pullback entry,” is similar to the standard entry. 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If I can’t do that, I will not take the aggressive entry, because price could find support at the neckline.   Note: The trade pictured above would have reached a full take profit before re-testing the neckline. This is ideal, although they don’t all setup this way.   My stop loss, in the example above, is 5 pips above the high of the right shoulder. This gives me room to cover the spread plus a little cushion for 15 Minute time frame noise. My take profit is twice my risk. In the example above, you could have easily used the neckline as your take profit level instead.   Final Thoughts The head and shoulders chart pattern can be tricky to spot at times, especially in the Forex market. However, it’s worth learning to trade properly, because many strong reversals are preceded by this chart pattern.   Just like with candlestick signals, the context in which you trade this chart pattern is very important. A true head and shoulders chart pattern only comes after an uptrend. 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