How to trade using only Moving average for beginners

[NOUHOBBAD]

Trading using only moving averages can be a simple and effective strategy for beginners. Moving averages are trend-following indicators that smooth out price data to identify the direction of the underlying trend. Here's a basic guide on how you can use moving averages for trading:

Selecting the Moving Averages:​

1. Choose the Type of Moving Average:
   • Simple Moving Average (SMA): It gives equal weight to all prices within the period.
   • Exponential Moving Average (EMA): It gives more weight to recent prices, making it more responsive to current market conditions.
2. Select the Timeframe:
   • Short-term moving averages (e.g., 20 periods) react quickly to price changes.
   • Long-term moving averages (e.g., 50 or 200 periods) provide a smoother trend indication.

Basic Trading Strategy:​

1. Trend Identification:​

• Uptrend: If the price is consistently trading above the moving average, it indicates an uptrend.
• Downtrend: If the price is consistently trading below the moving average, it indicates a downtrend.

2. Entry Signals:​

• Golden Cross (Bullish Signal): Buy when the short-term moving average crosses above the long-term moving average.
• Death Cross (Bearish Signal): Sell when the short-term moving average crosses below the long-term moving average.

3. Risk Management:​

• Set stop-loss orders to limit potential losses.
• Consider position sizing based on risk tolerance.

4. Exit Signals:​

• Cross-over in the Opposite Direction: Exit when the short-term moving average crosses below the long-term moving average (for long positions) or above (for short positions).
• Price Reaching a Key Support or Resistance Level: Consider exiting when the price approaches a significant support or resistance level.

5. Additional Confirmation:​

• Use other indicators or chart patterns to confirm signals.
• Consider incorporating other technical analysis tools for a comprehensive approach.

Example:​

• Buy Signal (Golden Cross):
  • Short-term SMA (e.g., 20) crosses above long-term SMA (e.g., 50).
  • Consider entering a long position.
• Sell Signal (Death Cross):
  • Short-term SMA crosses below long-term SMA.
  • Consider entering a short position or exiting a long position.

Tips for Beginners:​

• Start with a demo account to practice without risking real money.
• Backtest the strategy on historical data to assess its performance.
• Stay disciplined and follow the rules of your strategy.
• Keep an eye on market conditions and adapt as needed.

Remember that no strategy guarantees success, and risk management is crucial. It's also recommended to continuously educate yourself and, if possible, seek advice from experienced traders.

 

[pippin]

Trading using only moving averages can be a simple and effective strategy for beginners. Moving averages are trend-following indicators that smooth out price data to identify the direction of the underlying trend. Here's a basic guide on how you can use moving averages for trading:

Selecting the Moving Averages:​

1. Choose the Type of Moving Average:
   • Simple Moving Average (SMA): It gives equal weight to all prices within the period.
   • Exponential Moving Average (EMA): It gives more weight to recent prices, making it more responsive to current market conditions.
2. Select the Timeframe:
   • Short-term moving averages (e.g., 20 periods) react quickly to price changes.
   • Long-term moving averages (e.g., 50 or 200 periods) provide a smoother trend indication.

Basic Trading Strategy:​

1. Trend Identification:​

• Uptrend: If the price is consistently trading above the moving average, it indicates an uptrend.
• Downtrend: If the price is consistently trading below the moving average, it indicates a downtrend.

2. Entry Signals:​

• Golden Cross (Bullish Signal): Buy when the short-term moving average crosses above the long-term moving average.
• Death Cross (Bearish Signal): Sell when the short-term moving average crosses below the long-term moving average.

3. Risk Management:​

• Set stop-loss orders to limit potential losses.
• Consider position sizing based on risk tolerance.

4. Exit Signals:​

• Cross-over in the Opposite Direction: Exit when the short-term moving average crosses below the long-term moving average (for long positions) or above (for short positions).
• Price Reaching a Key Support or Resistance Level: Consider exiting when the price approaches a significant support or resistance level.

5. Additional Confirmation:​

• Use other indicators or chart patterns to confirm signals.
• Consider incorporating other technical analysis tools for a comprehensive approach.

Example:​

• Buy Signal (Golden Cross):
  • Short-term SMA (e.g., 20) crosses above long-term SMA (e.g., 50).
  • Consider entering a long position.
• Sell Signal (Death Cross):
  • Short-term SMA crosses below long-term SMA.
  • Consider entering a short position or exiting a long position.

Tips for Beginners:​

• Start with a demo account to practice without risking real money.
• Backtest the strategy on historical data to assess its performance.
• Stay disciplined and follow the rules of your strategy.
• Keep an eye on market conditions and adapt as needed.

Remember that no strategy guarantees success, and risk management is crucial. It's also recommended to continuously educate yourself and, if possible, seek advice from experienced traders.

Can you explain in details how to backtest this strategy? Should it be OHLC candles of specific timeframes or tick data? I see only OHLC in my Hotforex platform with lowest resolution of 1M

 

[Arcanyx]

Another way to use MAs is to plot 3 MAs (close, high, low) and trade only when this channel angle is up or down (Raghee Horner tactic, she does use a 34 EMA wave channel to do this).

 

[Fin_Trader]

Another way to use MAs is to plot 3 MAs (close, high, low) and trade only when this channel angle is up or down (Raghee Horner tactic, she does use a 34 EMA wave channel to do this).

You can use the Alligator indicator, which consists of three MAs. When the price follows a trend, these averages are above each other; when the trend changes, these averages intersect and turn in the opposite direction.