The 50-week and the 200-week moving averages are some of the most important indicators that are always looked at by the pro traders. They act as support and resistance on the higher timeframes (most notably the daily, weekly and monthly) and crossovers between the two can also indicate major trend changes. This strategy is based on these two main principles related to the 50-period and the 200-week period averages and additionally uses the Stochastic Oscillator to determine potential trading opportunities.
Since it’s traded on the weekly chart, this strategy is of long-term nature which means that trades will not be generated frequently and trades need to be held for a longer period of time. You can expect trades to last anywhere between a few weeks and up to several months.
It's fairly easy to trade this strategy and there is scope for a degree of subjectivity and additional tools/indicators to be used with it. The required alignment of the moving averages ensures that the trader is taking trades in the direction of the prevailing trend only and helps to filter out trading opportunities of better quality.
Below is an example of a trade generated with this strategy.
Indicators to be used:
We are going to use 3 indicators as follows for this weekly timeframe Forex strategy:
Trading conditions of the strategy:
Long trade entry:
Long trade stop loss:
Long trade exit and targets:
Here are examples of long trades of this strategy:
Short trade entry:
Short trade exit and targets:
Here’s an example of several short trades that were generated on a daily chart of AUDJPY. This strategy is best used on the weekly chart but can be used successfully on other timeframes as well.
General guidelines for the strategy:
Related education and FX know-how:
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