Any trading strategy using moving averages needs a good trend movement in order to be effective.
As soon as the price begins to form a lateral range, moving averages become almost useless. The only thing that can be used is the convergence of moving averages, which indicates a depletion or a change in trend, as well as a possible lateral price movement.
In this trading strategy, in addition to moving averages, we will use two more indicators to confirm trading signals: RSI and Stochastic Oscillator.
You can use this trading strategy in the Forex market or other markets as intraday trading, swing trading and even long-term trading.
Features t Rendova Island strategy on the indicators SMA, the RSI and Stochastic has Oscillator .
- Platform: MetaTrader 4 .
- Currency pairs: preferably EUR / USD , GBP / USD , AUD / USD , USD / CAD , EUR / JPY .
- Timeframe: M5 and higher (preferably not lower than H1).
- Hours: around the clock (on timeframes from H1).
- Broker: Fort Financial Services , RoboForex , Forex4you, InstaForex
Used indicators and their parameters:
- Moving Average - uses two simple moving averages (SMA) with periods of 10 (slow SMA) and 5 (fast SMA). We use a combination of fast and slow SMA to determine the trend. When fast SMA5 crosses slow SMA10 from top to bottom, we assume that a downtrend is starting in the market and vice versa.
- RSI (Relative Strength Index) - shows us the strength of the trend.
- Stochastic Oscillator - shows overbought and oversold areas.
All indicators are pre-installed in the MetaTrader 4 trading terminal , you do not need to search and download them.
Trending strategy on indicators SMA, RSI and Stochastic Oscillator . Trading Rules.
1. Fast moving average SMA5 crosses the slow SMA10 from bottom to top. This says that the trend is changing upward.
2. The RSI indicator crosses the level 50 from the bottom up, which indicates an uptrend.
3. Stochastic has left the oversold zone and is moving up.
When all these conditions are met, we wait for the candle to close above the moving averages and open the position on the next candle.
Stop loss set just below the nearest minimum.
Take Profit . For profit taking, you can use different methods: the reverse intersection of moving averages, Fibonacci levels or trailing stops .
1. Fast moving average SMA5 crosses the slow SMA10 from top to bottom. This says that the trend is changing downward.
2. The RSI indicator crosses level 50 from top to bottom, indicating a downtrend.
3. Stochastic has come out of the overbought zone and is moving down.
When all these conditions are met, we wait for the candle to close below the moving averages and open the position on the next candle.
Stop loss set slightly above the nearest maximum.
We set take profit according to the same rules as for a purchase.
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