This is a standard and very popular formula among traders based on the two most reliable factors of price. They are trends and levels. And in this strategy, the simple moving averages (SMA 30 indicator) play the key role. In today’s article, we will introduce to you a trading strategy using these above. Please familiarize yourself with basic strategies first to have a good stepping stone.
Strategy Using SMA 30+ Resistance/Support
If you do not know these 2 indicators, you can review these two articles:
Regarding this strategy, these two indicators and the SMA 30 are to determine the trend of the price. The levels (Support/Resistance) will be the signal for entry points.
Basic Settings For SMA 30 Trading Strategy
These are still basic settings.
- Familiar asset pairs: USD/JPY, EUR/USD, USD/CAD.
- A 5-minute Japanese candlestick chart.
- The expiration time of 15 minutes or above.
- Setting up the SMA 30 indicator and identifying the levels of the price.
Formula For Opening Orders Using The SMA 30
After setting up the SMA 30 indicator, use it to determine the trend of the price. I would like to repeat a little basic knowledge.
– Prices in an uptrend: Candlesticks are above the SMA 30 and the SMA points up.
– Prices in a downtrend: Candlesticks are below the SMA 30 and the SMA heads down.
– Prices in sideways: The indicator goes sideways and keeps crossing candlesticks.
In this strategy, you can only open orders when the price goes uptrend or downtrend only.
Formula for opening orders:
Open an UP order = uptrend + the price touches the support (which is the broken resistance).
Open a DOWN order = downtrend + the price touches the resistance (which is the broken support).
Capital Management Method
Because this is a trendy trading strategy, the closer towards the end of the trend is, the more likely the levels are broken or the trend is over. Therefore, gradually reducing investment for later orders is the most reasonable capital management method for this strategy. Use the profit of the previous order as the investment amount for the next order. When you make a wrong forecast, stop trading and turn off your computer.
With this way of managing your capital, you will minimize the possibility of burning out your account and protect your profits. However, you will be at most tensed for the first order. This is the disadvantage of this capital management method.
Things To Note About This Strategy
1. When prices test the levels and a reversal candlestick pattern appears, you can completely ignore it.
As the example above, the price tests the support with a bearish reversal candlestick pattern (Evening Star). Then the price breaks out of the level and ends that trend.
2. If the price tests the levels with special candlestick patterns (Pin Bar, Pull Back, etc.), the correct rate will be higher.
3. Do not open orders when the price is not completely in a trend.
In the example above, the price only tests the level once after breaking. This cannot confirm that the price has entered a trend.
Some Opened Orders Using SMA 30 + Support/Resistance Strategy
1st order: The assets of USD/JPY The price broke out of the resistance, creating an uptrend. It then rebounded to test the level with a bearish candle => opened a 20-minute UP order.
2nd order: The assets of EUR/USD. The price was in a downtrend. It then tested the level (the old support) with a Pin Bar candlestick. This was a very good signal that the price would plummet => opened a 30-minute DOWN order.
Experience this effective strategy on a demo account right now. Do not forget to leave any comments and questions in the comment section. We will support you right away.