Forex Strategies

Long Term MA Angle Forex Trading Strategy

December 6, 2019

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Long Term MA Angle Forex Trading Strategy

Trading on long term trends is one viable way of trading the market profitably. It allows a trader to efficiently trade the market by taking less trades with bigger profits squeezed from the market.

With this strategy we would looking to trade the long-term trend using the 200 Exponential Moving Average and an MA Angle indicator. The goal of this strategy is to take trades as the long-term trend changes and hold to the trade as long as possible.

The 200 EMA

Moving Averages have many uses. Traders use it for a variety of reasons. Some traders use it to identify the trend. This could be done by identifying the location of price in relation to the moving average. It could also be done by using multiple moving averages and observing how the moving averages are stacked. It could also be used to identify potential entry points or areas. This could be done by waiting for price to touch the moving average and trade the bounce off it. Others use two moving averages to determine the area where to wait for price to bounce off. Moving averages could also be used as an actual entry trigger. Some use the crossover method, which uses multiple moving averages, while others trade the cross of price with a moving average.

The 200 Exponential Moving Average (EMA) is a popularly used moving average to determine the long-term trend. This is typically used as a filter by determining the location of price in relation to the 200 EMA.

MA Angle

The MA Angle is an indicator which measures the slope of a moving average. The idea behind this is that as price starts to trend, the slope of a moving average becomes steeper. The steeper the slope, the bigger the value that the MA Angle indicator plots. The steeper the slope, the stronger the trend tends to be.

Trading Strategy Concept

This strategy aims to trade the shift of the long-term trend using the 200 EMA. This is done by using the 200 EMA as the trigger itself. The trade should be taken as price crosses the 200 EMA or if price has just recently crossed the 200 EMA.

However, we should also align the midterm trend to the long-term trend. This is where the MA Angle comes in. The MA Angle is set at 50-periods, which is commonly used as a midterm trend filter. However, instead of using the traditional 50-period moving average, we will be using the slope of the 50 MA. This will be conveniently done by using the MA Angle custom indicator. Trades should be taken as the slope of the MA Angle indicator starts to steepen.

Indicators:

200 Exponential Moving Average (EMA) (Green)
MA Angle

Timeframe: 1-hour, 4-hour and daily charts

Currency Pair: any

Trading Session: any

Buy (Long) Trade Setup

Entry

Price should cross and close above the 200 EMA
The MA Angle indicator should start to print lime green histogram bars
Open a buy order at the confluence of the above conditions

Stop Loss

Set the stop loss below the 200 EMA

Exit

Close the trade as soon as the MA Angle indicator starts to print yellow histogram bars

Sell (Short) Trade Setup

Entry

Price should cross and close below the 200 EMA
The MA Angle indicator should start to print firebrick histogram bars
Open a sell order at the confluence of the above conditions

Stop Loss

Set the stop loss above the 200 EMA

Exit

Close the trade as soon as the MA Angle indicator starts to print yellow histogram bars

Conclusion

This simple strategy is a high reward-risk ratio strategy. This is because the nature of the trade setup is based on the long-term trend. This allows trades to run as long as possible based on the long-term trend. With the right market condition, big long-term trends could be caught using this strategy. There would be times wherein trades could run as high as more than 4:1 reward-risk ratio.

With regards to the stop loss, another option would be to place the stop loss on a swing high or swing low beyond the 200 EMA. This would yield a better win rate, however the reward-risk ratio would be a little lower.