Trading doesn’t have to be extremely complicated. Sometimes the simplest solutions are the most effective. Many successful professional traders can trade the market without worrying too much or spending too much time understanding where the market is moving. In truth, many expert traders employ simple approaches and strategies that are effective and repeatable.
Trading moving average crossovers is one of the most popular techniques to trade the currency market. Moving average crossover tactics are straightforward and methodical. Even inexperienced traders can easily follow the guidelines of a crossover strategy and benefit.
Moving average crossings assume that a trend is reversing since the average price of a particular currency pair is reversing as well. This can be seen on the price chart by drawing two moving average lines. If you look into trend reversal setups, you’ll see that the moving averages cross in that area at some point.
Not all moving average setups are successful. In fact, if a trade is kept until the moving average lines show another reversal, there is still a good possibility that price will reverse for a loss. Traders can either combine crossover tactics with other trading signals or with price action to boost their success rate, or they can predict a trend reversal against their present position rather than waiting for the moving average lines to cross against their trade.
Moving Average Calculator Cross Forex Trading Method is a straightforward crossover strategy that employs two unique moving average lines. Confluences from other indicators are also used to confirm a trend.
Jurik Moving Average
Jurik Moving Average (JMA) is a bespoke moving average line that was designed to reduce latency.
Moving averages are useful technical trading indicators. It is widely used by traders to identify trends and spot trend reversals. Most moving average lines, however, suffer from the same problem. The majority of moving average lines are trailing. When price makes drastic big swings, such as gaps and momentum candles, moving average lines tend to respond slowly.
When compared to most moving average lines, JMA is quite responsive. It carefully tracks price movements, even when there is a lot of momentum or a big gap. As a result, the JMA line is an ideal trend reversal signal for traders who need to react quickly to momentum shifts.
Kaufman Adaptive Moving Average
Kaufman Adaptive Moving Average (KAMA) is yet another unique moving average line that was created to improve on traditional moving average lines.
Moving average lines have two major drawbacks: latency and sensitivity to market noise. KAMA, on the other hand, carefully monitors price action when the market is indicating clear directions and there is little noise. However, when the market becomes choppy, KAMA smoothes out the noise when the price fluctuates. This results in a moving average line that is less vulnerable to noise while remaining highly responsive to price swings.
KAMA, like most moving average lines, can be used to identify trend direction and trend reversals. This might be based on price action crossovers with the KAMA line or another moving average line. It can also be utilized as a dynamic resistance or support line.
Relative Strength Index
The Relative Strength Index (RSI) is a traditional technical indicator that offers traders with a wealth of information. It can be used to detect trend, momentum, and mean reversals.
The RSI is a sort of oscillator indicator. It draws a line that oscillates between 0 and 100. It also contains indicators at levels 30, 50, and 70.
The placement of the RSI line in reference to its midline is frequently used to determine trend direction. If the line is higher than 50, the trend is bullish. If the line falls below 50, the trend is bearish. During a trending market, some traders add levels 45 and 55 to act as supports and resistances.
Levels 30 and 70 are commonly used to detect mean reversals. When the RSI line falls below 30, the market may be oversold. If the line crosses above 70, the market may be oversold.
Momentum traders, on the other hand, perceive the 30 and 70 signals differently. A break above 70 indicates bullish momentum, while a break below 30 indicates negative momentum.
Trading Strategy
This is a straightforward moving average crossover method that trades in the direction of the long-term trend and validates trend momentum with the RSI.
The 200-day moving average (EMA) line will be utilized to select trades for the long-term trend. This will be determined by the location of the price movement in reference to the 200 EMA line, as well as the slope of the 200 EMA line.
The RSI will then be used to confirm the trend. This will be based on the RSI line crossing above or below 55.
We then wait for the JMA line to cross the KAMA line once the trend has been confirmed. Price candles should also demonstrate momentum in the direction of trend reversals.
Indicators:
- KAMA
- JMA
- 200 EMA
- Relative Strength Index
Preferred Time Frames: 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: FX majors, minors and crosses
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
Entry
- Price action should be above the 200 EMA line.
- The 200 EMA line should slope up.
- The RSI line should be above 55.
- The JMA line should cross above the KAMA line.
- Price candles should show bullish characteristics.
- Enter a buy order upon the confirmation of these conditions.
Stop Loss
- Set the stop loss on the support level below the entry candle.
Exit
- Close the trade as soon as a candle closes below the KAMA line.
Sell Trade Setup
Entry
- Price action should be below the 200 EMA line.
- The 200 EMA line should slope down.
- The RSI line should be below 45.
- The JMA line should cross below the KAMA line.
- Price candles should show bearish characteristics.
- Enter a sell order upon the confirmation of these conditions.
Stop Loss
- Set the stop loss on the resistance level above the entry candle.
Exit
- Close the trade as soon as a candle closes above the KAMA line.
Conclusion
When done correctly, crossover methods like this one work. Trading crossovers based on lagging moving averages, on the other hand, may be ineffective.
This method employs moving averages that are meant to respond to price swings, providing it an advantage.
This method can help traders profit regularly in the forex market if they can also obtain a sense of what the market is doing based on price action and candlestick patterns.
