Who doesn’t want to live a luxurious life? Everyone is trying their best to secure their financial freedom. Even after having the best degree from the best university in the world, there is no guarantee you will get a decent job. For this reason, people are always looking for alternative sources income. This is where Forex trading comes into action. If you look at the experienced traders in Hong Kong, you will be surprised to see how well they trade this market.
In order to make a consistent profit from this market, you must have a balanced trading strategy. In today’s article, we will give you precise guidelines so that you can execute high-quality trades using the moving average crossover trading technique.
What Is A Moving Average?
The moving average is one of the most popular indicators in the Forex market. You don’t have to do any calculations since the indicators will do the hard work. The retail traders can easily set the period value in the moving average and make consistent profit from this market.
100 And 200 SMA:
Though you can easily use a different value of the SMA (simple moving average) to trade the crossover, we will use the 100 and 200 SMA. The 100 and 200 SMA acts as the dynamic support and resistance level in the currency pairs. If the price of a certain asset touched the 100 or 200 SMA from below, the chances are very high that the price will drop. In a nutshell, the SMA will act as a dynamic resistance level. While using the 100 and 200 SMA, make sure you use the daily time frame or else you will get minor support and resistance levels in trading.
Crossover Of The SMA:
This is where things become a little tricky. If the 100 SMA cross above the 200 SMA, you need to consider the uptrend is coming. On the contrary, if the 100 SMA crosses below the 200 SMA, the bears are most likely to take control of this market. Just by using this simple logic you can easily make a huge profit in the Forex trading industry.
How Do We Execute The Trade?
Executing trades based on SMA cross is a bit complex. Since both the indicators are lagging, there is a high chance you will miss most of the profit. However, experienced traders use simple logic to make things easier. When the 100 SMA touches the 200 SMA, the smart traders look for potential bearish price action confirmation signal. Similarly, when the 100 SMA touches the 200 SMA from below, the professional traders look for buying opportunity. Some of you might not have a clear idea about a price action trading strategy. If you research the basic formations of the Japanese candlestick pattern, it won’t take much time to develop your skills.
Using The Stop Loss And Take Profit Level:
Setting up the stop loss and take profit level is fairly easy. Most of the time, the experienced traders use the different formations of the Japanese candlestick pattern to place their stop. On the contrary, take profit level is determined by using the nearest support and resistance level. If you want to make this trading strategy much more profitable, you can also use the Fibonacci retracement tools. Make sure you not using it in the lower time frame since it will generate low quality trading signals.
Trading is nothing but an art. No matter which trading strategy you use, you always have to lose some trades. The elite class traders often say risk management is the Holy Grail in the Forex market. In fact, this statement is true to the core. So, always try to trade the market with low risk. No matter what, never risk more than 1% of your account balance in any trade.