Moving average crossover trading

Now that you know how to use moving averages to predict if and when a trend is going to stop or reverse lets make things more interesting. To get a better Entry Point, you need to have a few moving averages set-up to see when they cross each other. This is an indication that the trend could change soon.

One of the most common buy or sell signals in all chart analysis is the MOVING AVERAGE CROSSOVER. These occur when two moving averages representing different trends crisscross. For example, when a short-term average crosses BELOW a long-term one, a SELL signal is generated. Conversely, when a short-term crosses ABOVE the long-term, a BUY signal is generated.

Looking at the above chart, for example, when the 10 period EMA crosses the 200 period SMA from below, it generates a BUY signal. Alternatively when the 10 period EMA crosses the 200 period SMA from above, this will generate a SELL signal.

Don't forget to put stop-losses in this method either. By this time you should know that stop-losses go without saying for any method under discussion. It's important to note that crossover Moving Averages work well in trending, more volatile markets. They don't work as well when in ranging markets.

Forex Educational Articles & News

Top 5 factors that affect exchange rates ...

There are many factors that affect exchange rates of currencies. However some are more important in currency trading than others. These are; Interest and Inflation rates, Trade balance, Currency market speculation, Foreign investment and Central bank market intervention. Learn how to use these factors in your forex tra ...

Forex Navigation