This swing trading strategy is a comprehensive and simple approach in trading higher timeframes such as 4-hour and daily timeframes. This system uses a moving average which determines a trend direction and trend change.

The 10 And 20 SMA with 200 SMA trading strategy is one of the simple fx trading strategy that is quite easy to understand and implement.

This trading strategy works as :

• Uptrend is indicated if the 10 EMA crosses above 20 EMA.
• Downtrend is indicated if the 10 EMA crosses below 20 EMA.
• EMA 200 is used to clearly identify the main trend.

Timeframe :  4hr timeframe and the daily timeframe.

Instrument : can use this strategy for any currency pairs.

Indicators : You need 10 SMA, 20 SMA, &200 SMA.

Long Entry :

• Go long when 10 EMA must cross above the 20 EMA.
• 10 EMA and 20 EMA are above the 200 EMA.
• Place buy stop order 5 pips above the high of the bullish reversal candle.
• Place stop loss at least 5 pips below the low of the bullish reversal candle.

Short Entry : 

• Go short 10 EMA must cross below the 20 EMA.
• 10 EMA and 20 EMA are below 200 EMA.
• Place sell stop order 5 pips below the low of the bearish reversal candle.
• Place stop loss at least 5 pips above the high of the bearish reversal candle.

Take Profit :

Take profit at 1:2 risk and reward ratio or at the previous swing high or low.

The Use of Moving Averages :

There are two main reasons why moving averages are useful in forex trading:

• Moving averages help traders define trend
• Recognize changes in trend.

Pros :

• Simple and easy strategy to follow
• Easy to automate.
• Very profitable strategy in trending markets.

Cons :

• Doesn’t work well in ranging markets so can lead to numerous false signals. Hence avoid using in ranging markets.

• Monitor after every new bar has closed. Wait till the current bar to be closed to take any action. Signals can change frequently when you are watching the graph tick by tick.