Fast Crossover Forex Trading Strategy
Crossover strategies are widely used among retail traders. This is because it is simple, easy to understand and implement, and doesn’t take much analysis. Anyone could do it. Beginners could jump straight into trading armed with a knowledge of a simple yet effective crossover strategy.
The Fast Crossover EMA Combo
Different combinations, parameters and periods of moving averages could work as a crossover strategy. However, there some combinations are more efficient than others.
There are moving averages that are widely used and observed. Different moving averages for different purposes and with different characteristics. The key is that the moving averages are widely observed among traders, enough for price to respect it. The first part, being widely used, could be observed among traders, trainers, forums, etc. The second part, having price respect it, is where the hard work comes in. It could only be proven through some good old fashion back and forward testing.
So, what are our three moving average combinations?
Our three moving averages are the 10, 25 and 50-period Exponential Moving Averages (EMA). These EMAs are commonly used among traders to have a visual on what the short-term trend is doing. Most trend following and continuation strategies use some sort of moving average along the range of 10 to 25. The 50-period EMA though is more of a mid-term moving average.
Trading Strategy Concept
This strategy is a basic moving average strategy that is geared towards the faster side. This would produce more signals which should allow the law of large numbers to work for us.
The two main moving averages that we should be looking at are the 10 and 50 EMA. What we are looking for is for the short-term trend, represented by the 10 EMA to cut through the mid-term trend represented by the 50 EMA. As soon as a crossover of the two occurs, then we should be ready for our setup.
The 25 EMA is also equally important. Although it is in the middle of both EMA and is usually not the main crossover signal, it also plays a big role on our exit strategy. Often times, when a trend starts to lose steam, price would crossover the 25 EMA and close beyond it. This crossing over and closing beyond the 25 EMA is our signal to exit the trade.
Stop losses and closes in profit are both exit strategies. Since they are both exit strategies, it would be wise to have them somewhat related in order to have a good mix of a good reward-risk ratio and win-loss ratio. Some strategies mess up the theory behind their trade by having a huge losing disparity between the exits in profit and the stop losses. For this reason, since our exits in profit are based on the 25 EMA, our stop losses would also be based on it.
Although closes on the reverse of the 25 EMA could mean the start of the end of a trend, there are also traders looking to enter the market at the retrace of a relatively close EMA, the 20-period EMA. This is the reason why we are using the 25 EMA as our midline and not the highly popular 20 EMA, we would want to squeeze out the profits from those re-entries, which often leads to a minor expansion phase. There are also instances when price would just pierce the 25 EMA a bit before resuming our direction. This is also the reason why we wait for the close of the candle before we exit the trade.
As an additional filter, we would also be taking crossover signals that agrees with the long-term trend. So, we will be using the 200 EMA as our filter, taking trades that are not going against it.
Currency Pair: any
Buy (Long) Trade Setup Rules
- Price and the 3 EMAs should be above the 200 EMA (blue)
- The 10 (gold) EMA should cross above the 25 (green) and 50 (brown) EMA
- At the close of the candle corresponding the crossover enter a pending buy stop order at the high of the crossover candle and wait until order is hit
- Set the stop loss below the 25 EMA (green)
- Close the trade if price closes below the 25 EMA
Sell (Short) Trade Setup Rules
- Price and the 3 EMAs should be below the 200 EMA (blue)
- The 10 (gold) EMA should cross below the 25 (green) and 50 (brown) EMA
- At the close of the candle corresponding the crossover enter a pending sell stop order at the low of the crossover candle and wait until order is hit
- Set the stop loss above the 25 EMA (green)
- Close the trade if price closes above the 25 EMA
This basic strategy is a simple working strategy used by some traders. Although it is not as popular as most combination of crossover strategy, it is quite effective in catching big trending moves that have strong momentum and allows the trader to exit the trade pretty early prior to the actual reversal.
Using this strategy also tends to agree with the price action of most trade setups. For the entry, the trade is usually taken right before the previous major swing point is breached. Although there is a tendency that price would bounce off it, it also allows the trader to enter the market prior to the sudden expansion due to the pending orders on the swing point being triggered. As for the exit, the trade is usually closed at a point where there is a considerably deep retrace, which is indicative of a trend losing momentum and reversing.
Study this trade setup and understand what makes the winning setups work and the losing setups fail. As you observe their common denominator, try to filter out bad trade setups further.
Forex Trading Systems Installation Instructions
Fast Crossover Forex Trading Strategy is a combination of Metatrader 4 (MT4) indicator(s) and template.
The essence of this forex system is to transform the accumulated history data and trading signals.
Fast Crossover Forex Trading Strategy provides an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
Based on this information, traders can assume further price movement and adjust this system accordingly.
Forex Metatrader 4 Trading Platform
- Free $30 To Start Trading Instantly
- No Deposit Required
- Automatically Credited To Your Account
- No Hidden Terms
How to install Fast Crossover Forex Trading Strategy?
- Download Fast Crossover Forex Trading Strategy.zip
- Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex system
- Right click on your trading chart and hover on “Template”
- Move right to select Fast Crossover Forex Trading Strategy
- You will see Fast Crossover Forex Trading Strategy is available on your Chart