Ma cross strategy

Today we are going to cover one of the most basic moving average strategies: the cross. As we know, if we use two different period MAs, when the faster one is above the slower one, we are in a bullish market and when the slower one is above, we are in a bearish market. This gives us a good opportunity: trade when the two MAs cross, just like in the picture below. For this example I used a 50 Simple Moving Average (red line) and a 100 Simple Moving Average (blue line):

Ma cross strategy

Conditions to enter long:  50 SMA comes from below, crosses 100 SMA upwards and a candle closes above both MAs

Ma cross strategy

Conditions to enter short:  50 SMA comes from above, crosses 100 SMA downwards and a candle closes below both MAs

Ma cross strategy

Stop loss placement: a few pips below/above last swing high/low (depending on the type of trade you are in). Give the trade some room to breathe (see the second picture above).

Take profit: our take profit is not set when we enter the trade, because we want to capture the entire move (or most of it), so we will exit when an opposite cross occurs.

We recommend trailing your stop loss behind the MAs.

Leave a Reply