One simple way to trade the forex market is by using moving averages to identify entry and exit points according to the direction of the trend.
Moving averages are the most basic type of indicator that traders use. In fact, most technical indicators are based on the concept of averaging out price movements in order to identify the trajectory of price. It is just logical to use this simple indicator to identify trend direction and trend reversals and use such information as the basis for a simple strategy.
One way to identify entry and exit points using moving averages is by looking at the crossover of certain moving averages. Although some moving average combinations have a lower probability of producing profitable trades, there are certain setups which are very effective.
The 5-10-34 Crossover Forex Trading Strategy is a simple moving average crossover strategy that provides trade entries based on the 5, 10 and 34-period Exponential Moving Average (EMA).
EMA 5-10-34 Crossover
EMA 5-10-34 Crossover is just as its name suggests. It is a technical indicator which provides trade signals whenever the three moving averages crosses over.
Instead of looking at multiple moving average lines, traders are provided with trade signals by plotting an arrow whenever the trend reverses. Traders could then use these signals to trade the market.
Although this moving average crossover setup is accurate, it is still beneficial to trade it along with the trend.
Trading Strategy
To trade this moving average crossover strategy, we will be taking trend reversal signals coming from the EMA 5-10-34 Crossover indicator which are aligned with the long-term and mid-term trend.
To identify the trend direction, we will be using two moving average lines, a 30-period Exponential Moving Average (EMA) and a 200-period Exponential Moving Average (EMA). The trend will be based on how the 200 EMA is sloping and how the two moving averages are stacked.
If the 30 EMA is above the 200 EMA, then the market is bullish. If the 30 EMA is below the 200 EMA, then the market is considered bearish.
Indicators:
- 30 EMA (Gold)
- 200 EMA (Green)
- EMA 5 10 34 Crossover (default setting)
Preferred Time Frames: 15-minute, 30-minute, 1-hour, 4-hour and daily charts
Currency Pairs: major and minor pairs
Trading Sessions: Tokyo, London and New York sessions
Buy Trade Setup
Entry
- Price should be above the 200 EMA line.
- The 200 EMA line should be sloping up.
- The 30 EMA line should be above the 200 EMA line.
- Enter a buy order as soon as the EMA 5 10 34 Crossover indicator prints an arrow pointing up.
Stop Loss
- Set the stop loss on the fractal below the entry candle.
Exit
- Close the trade as soon as a candle closes below the 30 EMA line.
Sell Trade Setup
Entry
- Price should be below the 200 EMA line.
- The 200 EMA line should be sloping down.
- The 30 EMA line should be below the 200 EMA line.
- Enter a sell order as soon as the EMA 5 10 34 Crossover indicator prints an arrow pointing down.
Stop Loss
- Set the stop loss on the fractal above the entry candle.
Exit
- Close the trade as soon as a candle closes above the 30 EMA line.
Conclusion on the 5-10-34 Crossover Forex Trading Strategy
The 5-10-34 crossover is a proven and effective crossover trading strategy. There are traders who have been profiting in this crossover setup, although some may have done some minor tweaks to optimize their strategy.
However, this strategy should not be taken blindly. Profitable traders often use candlestick patterns with this strategy in order to identify high probability trade setups. They also tend to exit the trades earlier using price action.
This strategy has a relatively higher probability compared to the standard setup because trades are aligned with the long-term and mid-term trends.
Recommended MT4 Brokers
XM Broker
- Free $50 To Start Trading Instantly! (Withdraw-able Profit)
- Deposit Bonus up to $5,000
- Unlimited Loyalty Program
- Award Winning Forex Broker
- Additional Exclusive Bonuses Throughout The Year
>> Sign Up for XM Broker Account here <<
FBS Broker
- Trade 100 Bonus: Free $100 to kickstart your trading journey!
- 100% Deposit Bonus: Double your deposit up to $10,000 and trade with enhanced capital.
- Leverage up to 1:3000: Maximizing potential profits with one of the highest leverage options available.
- ‘Best Customer Service Broker Asia’ Award: Recognized excellence in customer support and service.
- Seasonal Promotions: Enjoy a variety of exclusive bonuses and promotional offers all year round.
>> Sign Up for FBS Broker Account here <<
Click here below to download: