THE DEFINITIVE GUIDE TO TRADING PAID INFORMATION!
The Moving Average (MA) is the most fundamental indicator in trading, but its simplicity hides the most powerful tool for identifying the start and end of trends. Learning to read MA crosses is crucial for successful trading, both in Forex and in Cryptocurrencies.
1. ⚙️ Fundamentals: What are they and why are they crucial?
A Moving Average is a curved line that smooths out price noise to show the average direction of a trend over a specified number of periods (e.g., 50 candles).
Types of MA and their Key Difference
The Golden Rule: The longer the period (e.g., 200), the smoother the line and the stronger the long-term support/resistance.
2. 🔑 The Concept of MA Crossovers (Golden & Death Cross)
The Moving Average Crossover is the clearest trading signal that can be obtained. It occurs when a faster MA (short period) crosses a slower MA (long period).
🎯 The Dual Function of MAs
Before a crossover, Moving Averages act as:
Dynamic Support and Resistance: In a bullish trend, MAs act as support, bouncing the price. In a bearish trend, they act as resistance.
Price Breakouts: A decisive breakout of a slow MA (e.g., SMA 50) often predicts the creation of a new trend in the direction of the breakout.
3. 🛠️ Stronger Entry Strategies
Strength increases when more than one confirmation is used (multi-confirmation).
A. Dual EMA Crossover (Main Strategy)
The EMA 20 (fast) and EMA 50 (slow) are used.
Entry: When the EMA 20 crosses the EMA 50 in the desired direction.
Advantage: This crossover is faster than the crossover of SMAs with the same periods, allowing for earlier entries.
B. Three MA Crossover (Greater Precision)
Three MAs are used (e.g., SMA 20, 50, and 100).
Bullish Entry: When the three MAs align from top to bottom in order: Fast (20), Slow (50), Slower (100).
Advantage: Triple confirmation makes the signal more accurate, although the entry may come later, sacrificing part of the movement.
C. MA + MACD Crossover (The Strategy with Greatest Confluence)
This is one of the most powerful strategies, as the MACD indicator already uses moving averages in its calculation.
Double Confirmation: The MA Crossover (e.g., 20/50) is expected, immediately confirmed by a crossover in the MACD lines in the same direction.
Entry: Sell or Buy only after both signals have occurred.
4. 🛑 Risk Management (The Most Important Part)
An entry signal without risk management is not a trading strategy.
Stop Loss (SL): If you enter a trade based on a crossover, place the Stop Loss on the other side of the crossover.
Long Entry (Bullish): SL below the minimum created at the time of the price change.
Short Entry (Bearish): SL above the maximum created at the time of the reversal.
Take Profit (TP): The crossover strategy does not provide a fixed exit point. You must wait for the opposite signal:
Close the trade when the price gives the opposite crossover (e.g., if you entered long with a Bullish Crossover, close with the Bearish Crossover).
Close the trade if the price breaks a previously drawn trend line (MA + Price Action Technique).
The Stop Loss is never negotiable. The Take Profit is managed dynamically.
