This strategy is based on crossing two moving averages. The red moving average has a period of 50 and is slower, while the blue moving average has a period of 20 and is faster. As a financial instrument in this example, we used the German stock index DAX and the time period of the chart is four hours. This strategy can also be applied to other instruments or time periods.
The basic principle of the strategy is to sell when the faster average crosses the slower one from top to bottom (on the graph marked with red marks) and to buy when the faster average crosses the slower one from bottom to top (on the graph marked with green marks).
The advantage of this strategy is that it can also capture larger trends on the charts, which can bring a significant profit. The disadvantage of the strategy is precisely during trading to the side, when more false signals can occur.
The positions must be opened after closing the 4-hour candle and opening the next 4-hour candle if the condition of crossing the diameters is met (the graph shows the values of the individual diameters, so it is not a problem to read them). We recommend a stop loss on DAX of at least 100 points, while Take profit can be at three hundred points. At the same time, it is good to move the Stop loss (so-called Trailing stop), for example, after gaining 100 points.
The chart shows several positions, with five sales and four ending in profit. There would be four buying positions and at least three would end up in profit, one around zero - assuming a moviement of stop loss.
This strategy is suitable for advanced traders.
