A Moving Average is one of the most popular technical analysis tools used by traders worldwide. There are many strategies related to its proper usage, as it can work as an indicator to make profits or cut losses. Today we shall talk about two profitable moving averages forex strategies.
Before you continue, we recommend reading the What is a Moving Average Indicator article if you do not know the meaning of this term.
Guppy Multiple Moving Average Strategy
We are going to start with this strategy because of its efficiency. It consists of 2 different groups of exponential MAs. The proper usage of this strategy requires the trader to know about both of them.
The set with moving averages for 3, 5, 8, 10, 12, and 15 trading days is used to highlight the way of users that trade for short terms.
The other set is used to show the activity of people who invest in long terms. The MAs are set from 30 to 60 days.
When you have a situation where support from long-term MAs lacks short-term trends, this can mean that a longer-term trend will soon reach its end. If you know the Ribbon strategy, this is going to be much easier for you. You must look for crossovers in the Guppy strategy, just like in the Ribbon strategy. A turning trend is signalized by short MAs crossing long averages higher or lower.
Gann Square of Nine is a great tool for searching two things: support and resistance. Read the article to know how you can use it in the strategies mentioned here.
Moving Average Convergence Divergence Trading Strategy
This is one of the techniques that are capable of indicating market directions, trends, and momentum. This is a tactic that requires the users to set two exponential MAs, one with a 26-period, and one with a 12-period. The MACD is what shows how the two periods differ. A 9-period exponential MA is also used on a histogram to show both kinds of relations to a zero line.
A huge number of moving average strategies use the MACD indicator. The main idea is trading on crossovers. When the indicator gets higher than the zero lines, that means that an uptrend takes place. As a moving average crosses only the signal line from a lower position, you have to buy.
As only the indicator gets below the zero lines, this means that the price is at a downtrend. Wait for the indicator to get lower than the signal line. Then it would be best if you sold short.
- In a long trend, finish the trade when you see that the MACD falls below the signal line after reaching it or becoming higher;
- Short trades, however, require the trader to quit when the MA Convergence Divergence reaches the signal line.
Do not forget to use stop-loss orders. In these types of moving average strategies, you should set one above the last swing high.
We have reviewed the Guppy Multiple Average and Convergence Divergence strategies. These are moving average strategies for commodity and other assets. If you use them properly, you will have no trouble making profits.