[00:01] explain what moving averages are, how you can use them for trading, and a profitable trading strategy with moving averages. So, once you've watched the video, you can start trading with moving averages, whether
[00:16] you're a beginner or advanced. Also, below in the first pinned comment and in the description of this video, you'll find courses on trading with moving averages, profitable trading strategies, and more free
[00:30] trading training so you can continue developing as a trader without investing your own money. It doesn't matter if you have more or less capital or
[00:48] of the best indicators when it comes to trading, and in my opinion, they are for three main reasons. The first is that they make the chart much more visual. That is, the moment you add a moving average to your
[01:01] chart, you can more visually detect what is happening. Is a moving average strictly necessary to analyze what is happening with any asset? The answer is no, but it is true that they allow you to
[01:14] determine much more quickly whether the trend is bullish, bearish, or based on...  The slope of the moving average itself, and the momentum it's in, allow us to generate dynamic support and resistance zones
[01:29] that aren't visible through the price alone. For example, in this entire downward movement we're seeing, we realize that it's the moving average that's constantly preventing the price from breaking and changing the trend.
[01:44] As I said, this not only makes the chart more visual but also allows us to detect that clear resistance zone. We could mark that zone with a diagonal line. Yes, but point number one: I'm sure it won't be as
[01:58] clear. Look, if we actually use this diagonal line here, it's true that the first touches do use both the moving average and the diagonal, but in the final part of this movement, it's not the diagonal line that's being
[02:12] respected; it's the moving average. Furthermore, in this case, we have to have one diagonal line for the first phase or for the second phase of the movement and another diagonal line for the first phase of the movement because we can't use the
[02:26] same diagonal line. And in this case, it looks even stranger. On the other hand, the moving average stranger. On the other hand, the moving average is acting as such at all times. Finally, we could say that moving averages greatly facilitate...  In
[02:38] decision-making, we can use moving averages to detect entry points, exit points, and position management. Through this moving average itself, wondering if it's a trend reversal, a breakout, or a
[02:53] good entry point. The moving average will determine whether or not it's valid for our trading strategy. Many people might ask, "Hey, how are these moving averages generated?" or "How can we know
[03:06] what defines a moving average?" Well, in this case, let's define it very quickly. When you have a movement, that is, an upward trend, for example, the price is rising. What's happening here is that, if
[03:20] this is a daily chart, each part—even though it looks like a specific direction—is made up of a number of candles. There are many days: several days up, several days down, several days up, several days down, and so on.
[03:33] and so on. When you 're using a 20-session moving average, what the chart will do to calculate this moving average is take
[03:48] into account the last 20 candles. If this is a daily trend on the chart...  A is a daily trend on the chart...  A daily chart will take into account 20 days, but if it's not a daily chart, but an hourly chart, for example, it will take into account
[04:01] hourly chart, for example, it will take into account 20 hours because it will use 20 units, so to speak, that is, 20 candlesticks. So what it will do is add up the So what it will do is add up the last 20 days: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10,
[04:15] last 20 days: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, up to 20. It will add them up and then divide by 20. This is precisely where the variables of moving averages come from. That is to say, it's not quite that simple, it's not that clear because there are many types of
[04:28] moving averages. In the end, these are mathematical formulas, and anyone can create their own moving average. But we could summarize them into three main types of moving averages. And from these three types, the many other
[04:40] types of moving averages branch out. The first type of of moving averages branch out. The first type of moving average is the simple one. The simple one does what I said: add up the last 20 candlesticks and divide by 20. That's it, it doesn't do
[04:54] anything else. Then we have the exponential one. The exponential one exponential one. The exponential one adds and divides like the...  It's simple, but what it does is give more weight to the final part. That is, if we have 20 candles,
[05:09] if we have 20 candles, for example, the last 10 are given more weight in this mathematical formula. Through the formula itself, what it generates is that, for example, we have a trend. Imagine we have the
[05:23] moving average—let's put it in another color. We even have the simple moving average in blue, which would go something like this: when the price goes up, it gets closer, then it goes down, and so on. The when the price goes up, it gets closer, then it goes down, and so on. The
[05:39] exponential moving average do? Because what the exponential moving average does is weight and give more weight to the last 10 candles, for example. It would be much closer, starting here. But as the price falls, it would get closer
[05:53] and be more accurate and closer to the price itself. But this isn't the last type of moving average we have. Finally, we also have a type of moving average called the weighted moving average.
[06:09] exponential moving average, but it gives even more weight and importance. It weights these last candles more clearly. So, if we put the...  The simple moving average, the weighted moving average, and the exponential moving average—
[06:26] what will happen is that the weighted moving average will look like this, okay? So we'll have a simple moving average in blue that goes much further back because it simply adds and divides. We'll have an exponential moving average
[06:44] that goes a little closer to the price, and finally, as we can see in red, we'll have a weighted moving average that is getting much closer to the chart structure
[06:56] simply because it gives it even more weight than the exponential moving average. Having said what moving averages are and the three main types of moving averages— the three most important moving averages when trading—
[07:10] interrelate and how they interact with the price and why they are so attractive. Moving averages are trend indicators; that is, if there isn't a clear trend, if the price isn't forming a trend, whether
[07:25] bullish or bearish, moving averages are useless. Why? Because when movement that goes up, then goes down, then touches the So, what we all know as a range, what
[07:39] happens with the moving average? Well, in this case, the moving average comes from below and doesn't actually do anything. It does n't act as anything; it doesn't make the chart more visual, nor does it help you find support and
[07:54] resistance zones that aren't visible with the price action, and it certainly doesn't facilitate taking directions. In fact, it's just a nuisance. On the other hand, when trend, a direction, whether bullish or bearish, the moving averages
[08:07] follow it, and it's at this moment, at this moment, that they generate value, at this moment that they allow us to make decisions. They make the chart more visual and show specific support and resistance zones. What they do is, in
[08:22] support and resistance zones. What they do is, in a way, follow the price and allow us to form trend levels. You know that when the price has already touched this moving average several times, then when the price
[08:35] wants to, or is at a certain point, a more developed level, you know that this level here, the moving average level, is going to be a determining level, and when the price reaches it... Here, you can make a
[08:49] buy decision, or if the trend is bearish, when it approaches the moving average and the price is doing so, you know that when it reaches this moving average, you can make a sell decision simply because what's
[09:02] happening is that trend level is being formed. So, understanding this, there are different ways to trade with moving averages. We could divide it again and simplify it into two main ways of trading. Let's
[09:17] put it here: with moving averages, there are two main ways. One way would be main ways. One way would be through impulses and pullbacks, and another way would be through moving average crossovers. These are the
[09:32] two main ways. What are impulses and pullbacks? Well, simply put, impulses and pullbacks mean understanding that when you have, for example, a downtrend and the price is
[09:45] constantly rejecting a moving average, when it breaks, this moving average, for example, we'll put it in red. You have this moving average that's acting like this, so you know perfectly well that when
[09:58] so you know perfectly well that when the price breaks this moving average, what can happen? First, it's support, then resistance.  And what first is resistance, then what can clearly be support. So
[10:13] when a breakout forms, whether it's a trend reversal or, as we discussed before, following the trend, you know that one of the things that can happen is that the price comes here, tests the moving average, and without
[10:26] knowing what's going to happen—because nobody knows what's going to happen—it does this, and if the moving average does this, then what's happening on the chart is that we've rejected it, and we can continue with that
[10:39] trend reversal. This is one of the ways to trade with moving averages, but we're going to focus on the second way, which is the moving average crossover. What is a moving average crossover? Well, the most
[10:53] common thing when trading, and this is why we'll focus on this method, is to use different moving averages. When you have a movement, for example, changes direction and then it does this, for example—I made this up. There are
[11:06] different moving averages. Before, we gave the example of 20. But what happens if you have a daily chart and you put a 20-period daily moving average?  So, it comes along like this, for example, and it goes like this. Then you
[11:24] add a 100-period moving average. What will happen with the 100-period moving average? Well, instead of coming so close, it will do this. Do you understand? So, the moving average crossover, and why? Simply because it
[11:40] takes into account the last 100 sessions and is a much longer moving average. If we used a 200-period moving average, for example, instead of going like the 100-period one, it would come around here, it would do the same, just to give an example. So, what happens?
[11:54] Let's remove this 200-period moving average; it's not necessary. Now, what not necessary. Now, what happens when this moving average crossover forms? Well, many people, when the short moving average (the
[12:07] many people, when the short moving average (the green one), sell. Why? Because the short- term trend has been so bearish that it has even broken the long-term trend; that
[12:23] trend reversal has formed. So, at this precise moment, there are many orders, and the price  It does indeed tend to fall, and then the same thing happens when, for example, in this price action I've made up, the short moving average (the
[12:38] blue one) then breaks out from below, the long moving average (the green one) breaks out from above. People go long. In other words, the structure is very simple: you have a short moving average and a long moving average.
[12:52] When the short moving average breaks out long moving average is a buy signal; when the short moving average breaks out from above, the long moving average is a sell signal, plain and simple.
[13:05] Hey, and why are we going to focus on this way of trading? Why are we profitable trading strategy through a moving average crossover? Well, point number one,
[13:17] because it's a more objective way of trading. You do n't have to be analyzing whether this is a pullback, or if it's a higher high, or if you do n't like the pattern, or if it has corrected too much. It's simply knowing that
[13:31] when there's a moving average crossover, you buy or sell. Secondly, because it's buy or sell. Secondly, because it's obviously less difficult. Why? Because there are fewer elements involved: two
[13:44] moving averages. That's it. It's pure simplicity.  Thirdly, because it's much more automatic,
[13:57] objective, and less difficult. Being more automatic means you don't have to more automatic means you don't have to analyze and overanalyze; it's
[14:10] and you forget about it. And these three elements—and this is the best part— encourage a much less emotional way of trading. There are fewer emotions involved,
[14:26] fewer doubts, fewer fears, and less greed. Simply because you'll be constantly doing what a trading strategy based on two or three very simple rules, which you'll see below, tells you.
[14:38] So, having said this, having explained what moving averages are, main ways to trade with moving averages, and having listed the advantages of the most important method of all, I'm now going to explain the four
[14:53] rules of a profitable trading strategy with moving averages. Well, before anything else, trading strategy isn't just any trading strategy. Below, description of this video, as I mentioned, you'll find other links of
[15:08] interest: contests, training, tutorials, and more profitable trading strategies in general, and also with moving averages. We're talking about a trading strategy that has been backtested. We've done backtesting—you'll
[15:21] find the video below in the first pinned comment and in the description of " What is the best trading strategy with moving averages and moving average crossovers?"— and we've determined through historical backtesting that this is
[15:34] the best trading strategy that can be implemented. So, it's not like I'm going to invent two moving averages or that I prefer one strategy over another; these are real data. And by the way, I recommend you watch the video, but I'll give you
[15:46] a spoiler: this trading strategy generates more than one percent annualized return than the S&P 500 itself. So, having said that, let's get straight to the point and explain which profitable trading strategy
[16:01] will use two moving averages. As we've mentioned, moving average crossovers are based on considering a moving average—a considering a moving average—a fast moving average, or short moving average,
[16:14] fast moving average, or short moving average, we could say—and a slow moving average. These are the two main characteristics; we'll define the rest later. In this case, the fast or short moving average will be the exponential moving average,
[16:27] that is, the  The 80-period EMA and the slow moving average will be the 80-period EMA and the slow moving average will be the
[16:41] 280-period exponential moving average. This trading strategy will be used on gold (in USD/CHP). You can use this asset directly, and it will be used on a 5-minute chart. These are the main characteristics of the trading strategy. So, before
[16:56] showing you a concrete example of the strategy, I'm going to show you here very quickly how it would look. We have the price moving up and down until it changes direction.
[17:10] We don't know this part; we'll see it later. I'm going to put it in a different color so we understand that it's a structure we don't know. We're going to focus on everything
[17:24] else, in the section on moving averages. We have a fast or short moving average, as I mentioned, of 80, which generally goes like this. And generally goes like this. And then we have a slightly
[17:39] faster, or rather, slightly slower, moving average, which is the 280-period one, which we're going to draw in a different color, red, which could go, for example, like this. Okay, so at the moment when...  The fast or short moving average crosses
[17:57] fast or short moving average crosses above the slow moving average, in this case, the 280-period moving average. Right now, we're going to
[18:09] structural change, this trend reversal, has formed. I've drawn them somewhat like this; reality wouldn't be exactly like this, but it's a general diagram just so we understand the basics. And right now,
[18:22] the basics. And right now, we would enter. Now I'm going loss, which is how to exit, and how to manage the take profit. But the structure would simply be this short moving average of 80, the long moving average of 280, the 5-
[18:38] minute gold chart. And, speaking of what we've said about this moving average crossover, to show you an example on a chart, let's go back to where we were before and open this chart here. As you can see, it's the
[18:53] 5-minute chart of gold in USD. It's what we discussed earlier: we have two moving averages, one of 80 (in this case, the blue one) and another of 280 (the white one). Perfect, we have all the ingredients. What we
[19:09] we have all the ingredients. What we the blue moving average breaks above the white moving average, or that the blue moving average breaks below
[19:24] the white moving average. There are multiple examples of this, and it happens constantly. It's a very easy and simple strategy. So, for notice what's happening at this precise moment: the blue moving average
[19:39] precise moment: the blue moving average here breaks above the white moving average, right moment when we would execute the position. How do we execute the position?
[19:54] We execute a market buy. There's no need to think too much; we just go here, "Bam, market buy." What is the precise moment? Well, this moment here. This is when that breakout forms. Where would we place the stop loss? Below
[20:08] the short blue moving average. Where would we place the take profit? I recommend that we don't set an exact, specific take profit because, as we 've discussed before, moving averages are trend-following, and what we have to do
[20:23] is try to participate in the trend as much as possible. So, if what you many trading strategies that...  They're based on that, and I think it's perfect, but trading strategy is limiting the profit to a two-to-one, for example, there will be
[20:38] times, as in this case, when you'll earn a little less with this limiting profit—we'll see why in a moment—but there will be many other times when this won't create such a rapid turnaround, but rather it will continue and continue and continue, and
[20:54] by limiting it to a two-to-one, you'll earn a two-to- one, but you'll miss out on earning 81%, for example, on many occasions. So how are we going to get out of this?  The position's resistance, or backtesting, is what determines when to
[21:09] exit the position. We exit the position when the moving average crosses, or the fast moving average breaks down from top to bottom, or the slow moving average breaks down from top to bottom. In other words, we exit when moving average crosses, or the fast moving average breaks down from top to bottom, or the slow moving average breaks down from top to bottom. In other words, we exit when
[21:23] a breakout from bottom to top formed; we went long. We exit when a breakout from top to bottom addition, a short position would be opened. This
[21:36] strategy constantly generates entries and exits. In this case, the profit would be less than what it would be with a
[21:48] random example of one of many we could use. No, it's not a representative example; there are many other examples where this pattern forms. Look at this case, for example: this large downward movement forms, there you have it. And what ends up
[22:02] this large downward movement forms, there you have it. And what ends up happening is that the price falls and falls and falls and falls and falls, and in the end, much further back, much further ahead, or rather, falls, and in the end, much further back, much further ahead, or rather,
[22:15] But having limited the profit to both two and 21, there are times where you do win 2 to one, and the other way around. You would have won 1.70, but I assure you that when it keeps pulling and
[22:27] pulling and pulling, and a quick reversal doesn't form, as in this case, when a trend forms, you don't win a two to one or a three to one, you win 81. And then eight trades or four trades, because you would have to divide it by two,
[22:42] generate what this generates. This is one times four compared to the other. So, this would be the trading strategy. As you can see, it's a very that it has already been backtested. I
[22:55] pinned comment and in the description of this video, as well as this video, as well as the courses, the tutorials, the training. It's full of 100%
[23:09] free content so you can continue training as a trader without needing to invest your money. Before I go, I'd like to ask you what you want me to upload next. Which video? With which indicator? With what type?  What kind of
[23:21] indicator? With what type?  What kind of a tablet, simply to make things a bit more visual? Let me know in the comments below, as I take them very seriously. There's no point in me creating
[23:34] content if you're not interested; I wouldn't waste my time explaining or providing valuable free content. So tell me in the comments what kind of content you'd
[23:46] like to see, and I'll create whatever gets the most votes or is repeated most often. I'll leave this video here. I hope you liked it and found it helpful, which is the most important thing. If so, please like, subscribe, and share it with friends and
[24:00] family. See you in the next video! Goodbye!