[00:02] strategy that you can use with the moving average indicator so average crossover it is a very simple and famous strategy
[00:14] but most traders are actually trading it the wrong way the biggest mistake that everyone makes when trading the strategy over they immediately take a position
[00:28] when the faster moving average crosses above the slower moving average they immediately take a buy position and when the faster moving average crosses below the slower moving average they immediately take a sell position
[00:43] this is actually the worst way of trading the moving average crossover because using the strategy this way only works if the market is trending you will receive so many false signals and this will wipe
[00:59] out your account very quickly the next mistake that average crossover is that they use too many moving averages remember the more moving averages that you use
[01:12] the later your entry signals will be for example let's say you're using two moving averages the 20 and the 50 period so period you take a buy position here but
[01:29] if you added another moving average let's say the 200 period then you would instead enter here which is a much later entry compared to if you only used two moving averages
[01:41] so the lesser the better another mistake that people make when trading the crossover strategy is that they're trading it on lower time lower time frames tend to have less trend and more range markets
[01:56] so that is why most traders lose money when trading the crossover on lower time frames so instead this is how i would trade the moving average crossover i'm only going to be using two moving
[02:08] averages the 20 and the 50 period the first step is that i would choose a high time frame i recommend using the daily time frame for this strategy but if you think that that's too high
[02:22] instead next i would pick a pair then what i'm trying to look at is how the market is reacting to the moving average crossover let me show you what i mean if you zoom
[02:37] out and look closely at the 20 and 50 period you can see that the price tend to not react to the crossover here we can see that the moving average crosses over downwards
[02:49] but instead of following the crossover and also heading downwards the price instead reverses and heads back up and now you can see it again here the moving average crosses upwards
[03:01] but the price instead went downwards so clearly this market has a history of not reacting to the crossover and so i will not use the crossover strategy on this market
[03:13] so let's look at another pair instead here's the euro gbp if you zoom out and look closely at the 20 and 50 period we can actually see that the market tends to react to the crossover over here we can see that the moving
[03:28] average crosses over upwards and the price followed that signal and made an uptrend next you can see it happening again here crosses over downwards and the price made a downtrend
[03:42] this has actually happened multiple times in this chart every time the moving average crosses over the market tends to follow that same direction and so now we know that this market has
[03:54] a history of following the crossover so i will confidently trade the crossover strategy on this market but remember just because a market reacted to the crossover in the past doesn't guarantee 100 that it's going to
[04:08] do that again in the future however it will still have a much higher chance of doing so compared to the market that never place so once you identified the right market
[04:22] it's time to trade the crossover for your entry signal if the ma crosses above the 50 ma you take a buy position and if the 20 ma crosses below the 50 ma you take a cell position
[04:38] and for your exit signal you can use an exit indicator like the atr trailing stop loss to exit your trades compared to if you waited for the moving
[04:50] average to cross over again for example let's say you took a buy position here if you waited for the lines to cross you would have exited your trade here and wasted so many pips
[05:03] but if you had used a better exit indicator like the atr trailing stop you would instead exit here notice that it gave a much better exit signal and you would have kept more pips so that's my approach when trading the
[05:18] moving average crossover another way of using the moving average resistance and another indicator that is perfect for the strategy is the stochastics so here's an example
[05:33] on how the strategy works in this chart we can see that the price went up to this level it hit and reverses downwards this happened multiple times which further confirms that the moving average
[05:46] is acting as a resistance next we also noticed a pattern every time prices went up to the resistance while the stochastics is at overbought the price tends to reverse downwards
[06:00] price we are back at the resistance level while the stochastics is at overbought so this is a good is at overbought so this is a good opportunity to take a sell position
[06:13] chart we can see that the moving average is acting as a support as prices went down to this level hit and reverses upwards multiple times and we also noticed that
[06:27] every time prices went down to the moving average while the stochastics is that oversold the price tends to reverse back up so now as we look at the current price you can see that it is back at the
[06:41] support line while the stochastics is that oversold so this is a good opportunity to take a buy position
[06:54] can use is by combining the 200 exponential moving average increase its win rate let me give you an example if you're just trading only using the parabolic sr
[07:07] percent but if you combine it with a 200 ema it will increase the win rate to 46 it also works with other indicators as
[07:19] well for example the super trend if you're trading only using the super trend indicator it will give a win rate of only 39 but if you combine it with a 200 ema it can boost that win rate to 48
[07:36] so adding the 200 ema with any indicator can automatically increase its win rate and the way you combine the 200 ema with other indicators is very simple if the price is above the 200 ema
[07:50] you only take buy positions and if the price is below the 200 ema you only take cell positions so let me give an example trend gave a buy signal while the price is above
[08:05] the 200 ema you take a buy position but if the super trend gave a buy signal but the price is below the 200 ema then you ignore this buy signal this also works for cell signals as well
[08:21] if the super trend gave a sell signal and the price is below the 200 ema and the price is below the 200 ema you take a sell position but if the super trend gave a sell signal but the price is above the 200 ma
[08:35] then you ignore this cell signal so that's how you combine any indicator with the 200 ema so i just gave you the best moving average strategy that you can implement in your trading system right now and all
[08:49] i ask for in return is for you to take two seconds of your to the channel it literally takes only 2 clicks but it and you can also check out my other videos as well so thank you guys for
[09:04] watching and i'll see you in the next video