Strategy of crossing moving averages

Strategy based on moving average is quite easy to follow. Let’s look at this very simple system.

Currency Pairs: All

Time frame chart: 1 hour or fifteen minutes graphics.

Indicators: 10 moving-average, 25 moving-average, 50 moving-average.

Possible input: When the 10 period moving average pass through the 25 period moving average and continues through 50 period moving average, buy / sell in the direction of the 10 period moving average, then it clearly pass through 50 period moving average. (Just wait for the current price and the closing of the bar in the opposite direction of the 50 period moving average. This waiting helps to avoid false signals).

Possible outcome: Option 1: You can exit when 10 period moving average crosses the 25 period moving average again.

Option 2: You can exit when 10 period moving average returns and touches 50 period moving average (again proposes to wait until the bar closed on the opposite side of the 50 period moving average).

Advantages: It is easy to implement strategy, and it gives very good results when the market is in a trend and can capture large price movements.

Disadvantages: moving average is an indicator of subsequent movements, which means that does not predict future market such, but rather reflects the current market situation. This feature makes it vulnerable: first, because it can change its signals any time, second – because it is necessary to watch all the time; and finally, when the market traded in range (without trend) with very little fluctuation in price it can give many false signals, so it is not recommended to use during such periods.