Many people have heard about forex trading and how it may multiply people’s money multiple times in a short period of time. This frequently piques people’s attention. However, many people believe that trading is extremely tough and should only be attempted by exceptionally intelligent people.
This couldn’t be further from the truth. Although traders need have a certain amount of intelligence in order to grasp what they are doing, becoming a trader does not require much. In truth, basic tactics have been shown over and again to be effective. Traders that can stick to such a straightforward approach frequently enjoy the benefits of profiting from the forex market.
Crossover methods are among the most basic trading strategies that a trader may employ. In fact, when many novice traders first start trading, they are introduced to this sort of technique. Many, though, would have mixed outcomes. This is due to the fact that crossover tactics function effectively in markets with a strong inclination to trend but fail when applied in a range market scenario.
Utilizing pullbacks or retests is one approach to increase the likelihood of finding a profitable trade setup when using a (Ideal MA MACD Cross Forex Trading Strategy) crossover strategy. Rather than simply following a crossover technique, this helps traders to gain additional confirmation on a new trend.
2PB Ideal 3 MA
2PB Ideal 3 MA is a moving average-based bespoke technical indicator.
Moving averages are among the most effective technical indicators used by trend traders and trend reversal traders. This is due to the fact that moving averages are excellent at detecting trends.
Observing the direction of the slope of the moving average line is one method traders use moving averages to spot trends. The market is in an uptrend if the slope is upward. The market is in a downturn if the slope is downward. Another method is to examine the price action’s position in reference to the moving average line. When price activity exceeds the moving average, the market bias is positive. When price activity falls below the moving average, the market is negative. Moving average crossovers are frequently used by traders to identify trend reversals. A cross up would imply a probable reversal of the bullish trend. A negative trend reversal would be indicated by a cross down.
Moving averages are incredibly useful, but they are also quite prone to whipsaws during stormy markets. A decent moving average strikes a balance between being sensitive to market changes and being less prone to whipsaws.
The response of the moving average line is smoothed out by modifying 2PB Ideal 3 MA. This produces a moving average line that is less prone to whipsaws. The 2PB Ideal 3 MA may give strong trend reversal signs when used with a complementing moving average line.
OsMACD
OsMACD is another bespoke technical indicator that belongs to the oscillator family. It also uses the popular Moving Average Convergence and Divergence (MACD) indicator.
The OsMACD is a moving average divergence and convergence indicator. Essentially, this is the difference between two moving averages. This indicator calculates the difference using Exponential Moving Averages (EMA), with the quicker EMA at 12 bars and the slower EMA at 26 bars. The resulting histogram bars are then plotted. The histogram bars are then used to generate a Signal Line. The signal line is just a Simple Moving Average (SMA) of the bars in the MACD histogram. This indication also allows traders to choose the price source, which may be the close of the candle, the high, low, or the median.
Bullish directional bias is shown by bars and lines above zero, whereas bearish directional bias is indicated by bars and lines below zero. Traders may also use the crossing of the histogram bars and the signal line to predict potential trend reversals. The difference between the MACD histogram bars and the signal line is also represented as dots. Positive dots indicate a bullish directional bias, whereas negative dots suggest a bearish directional bias. To show motion, the bars, lines, and dots change color. This is determined by comparing the current value to the prior value. Blue denotes increasing bullish momentum, while red denotes increasing bearish momentum.
Trading Strategy
This is a straightforward crossover trend reversal method.
When the 20-period Exponential Moving Average crosses above the 2PB Ideal 3 MA line, a trend reversal signal is formed. The OsMACD histogram bars and lines crossing the zero midline should also indicate this trend reversal.
However, before entering the trade, we should wait for price action confirmation. This is essentially a retreat to the moving average lines, followed by a price rejection in the vicinity of the moving average lines.
If all of these criteria are satisfied, we have a legitimate trend reversal scenario.
Indicators:
- 2pbIdeal3MA
- OsMACD
- 20 EMA
Preferred Time Frames: 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 cross above the moving average lines.
- The 20 EMA line should cross above the 2PB Ideal 3 MA line.
- The OsMACD bars and lines should cross above zero.
- Price action should pull back towards the moving average lines and reject the area.
- The OsMACD bars should change to blue.
- Enter a buy order on the confirmation of these conditions.
Stop Loss
- Set the stop loss on the fractal below the entry candle.
Exit
- Close the trade as soon as the OsMACD bars cross below zero.
Sell Trade Setup
Entry
- Price action should cross below the moving average lines.
- The 20 EMA line should cross below the 2PB Ideal 3 MA line.
- The OsMACD bars and lines should cross below zero.
- Price action should pull back towards the moving average lines and reject the area.
- The OsMACD bars should change to red.
- Enter a sell order on the confirmation of these conditions.
Stop Loss
- Set the stop loss on the fractal above the entry candle.
Exit
- Close the trade as soon as the OsMACD bars cross above zero.
Conclusion
This trading method is effective when used to a market or currency pair that has a strong tendency to trend. This is because this method enables traders to spot and confirm a trend reversal based on price activity around the start of the trend.
This approach may be used by traders who can objectively watch price activity to profit from trend reversals in the forex market.