Contents:This strategy Based on the combination of SMA, MA, and MACD indicators, this trading system allows traders to enter the market as soon as any sign of a new trend exists. In this article, you will find the guide to apply this strategy on Forex market and create high profit.
How to use SMA, MA and MACD?
This strategy is a great suggestion for any traders, who are newbies or familiar faces with years of experience on the market. The result is totally worth a try: For the time of one year, a skilled trader supported by Combination can make a profit of 950 points with AUD/CAD. Users of this strategy should also notice that it is customized for currency pairs with the Australian dollar (not recommended with USD).
A simple moving average (SMA) is an arithmetic moving average calculated by adding recent closing prices and then dividing that by the number of time periods in the calculation average.
Forming the package:
- SMA (Smoothed moving average) with a period of 30;
- MACD 1 with parameters (25, 50, 9) and an MA with a period of 15;
- MACD 2 indicator with parameters (6, 12, 1).
Conditions for purchases:
- MACD 1: The MA with a period of 15 intersects with the MACD and stays lower (color);
- The MACD 2 is above zero and is heading up;
- The price is above the SMA with a period of 30;
- The first closed candle with a bullish body is the sign for a buy order;
- At the time when the MACD 1 intersects its own MA in the opposite direction, you should close the position.
Conditions for sales:
- MACD 1. The moving average with period 15 intersects MACD and is higher;
- The MACD 2 is below zero and is plunging;
- The price on the chart is below the MA;
- The first closed candle with a bearish body is the sign for a sell order;
- As soon as the lines in the indicator window of MACD 1 intersect in the opposite direction, the transaction should be closed at the current market price.
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Important rules for using Combination
- Only one position should be opened at a time;
- Don’t enter the market until the candle of confirmation is totally closed;
- After the crossing on MACD 1 indicator lines, the price can cross the moving average only once. If there are more intersections, then all subsequent signals should be ignored;
- The order’s expiration should be set in five to eight hours;
- All signals (except the MACD 1 signal) must be received during the 1st trading day;
- The maximum risk for each transaction shouldn’t be more than 2% of your total balance.
Pros and cons of the strategy
- Provides signs for entering a new trend early;
- Applies to familiar and ready-to-use indicators;
- Easy to understand and follow;
- Provides detailed information on buy and sell conditions.
- For such an early entering in the market, you may face some stop-loss orders before actually getting into the right trend;
- Patience and good emotion control must be maintained.
This Combination strategy is incredibly suitable for intraday traders with the time interval of 1 hour. Given a lot of advantages and a considerable high-profit that may allow a single successful transaction to cover three or even five loss deals, this strategy is a must-try tool for all traders and potentially yields profit in the long-term period. Just remember not to forget applying strict money management and keep your mind in calmness as there is no 100% perfect strategy in the world of Forex trading.