Retail traders are very familiar with crossover strategies. It is easy to implement and understand, and does not require much analysis. Crossover strategies can be created using different combinations of parameters and times of moving averages. Some combinations work better than others.
The Fast Crossover Forex trading strategy consists of three moving Averages namely 10, 25, and 50-period Exponential Movement Averages (EMA). These EMAs can be used by traders to get a sense of the trend's short-term direction. The majority of trend-following and continuation strategies employ a moving average in the range of 10-25. However, the 50-period EMA is more of a midterm moving average.
This strategy is a basic, moving average strategy that is geared towards achieving the faster side. This strategy would generate more signals, which should make the law of large number work for us.
We should focus on the 10 and 50 EMA as moving averages. We are looking for the short-term trend (represented by the 10 EMA) to cut through mid-term trends represented by 50 EMA. Once the crossover occurs, we can prepare for our setup.
Equally important is the 25 EMA. It is located in the middle of both EMA, but it plays a significant role in our exit strategy. Often, when a trend loses steam, the price will cross the 25 EMA and close above it. We should exit trades when price crosses the 25 EMA and closes beyond it.
Currency Pair: any
How to trade with Fast Crossover Forex Trading Strategy?
Buy (Long) Trade Setup Rules
- The price and the 3 EMAs should not be lower than the 200 EMA (blue).
- The 10 (golden) EMA should be above the 25 (green), and 50 (brown).
- The crossover candle is closed. Place a pending stop order at the top of the crossover candle. Wait until the order is complete.
- Limit the stop loss to below the 25 EMA (green).
- If the price is below the 25 EMA, close the trade
Sell (Short) Trade Setup Rules
- The price and 3 EMAs should not exceed the 200 EMA (blue).
- The 10 (golden) EMA should be below the 25 (green), and 50 (brown).
- The crossover candle closes. Place a pending stop order at the low candle to prevent it from closing. Wait until the order is fulfilled.
- Place the stop loss at least 25 EMA (green).
- If the price closes higher than the 25 EMA, you can close the trade.
How to download and install an indicator?
In order to install the indicator on your MT4 platform, you need to follow these steps:
- Click on “Download Indicator” button located at the bottom of the post.
- Save the file to your computer.
- Extract and move the files into MT4>Indicator folder of the MetaTrader 4 software file directory.
- Restart your Metatrader platform.
- Navigate to “Indicators.”
- And select “Fast Crossover Forex Trading Strategy” template to apply it on the chart.
Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.