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A Moving Average Trading Strategy That Works (This Is No Longer A Secret)

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A Moving Average Trading Strategy That Works (This Is No Longer A Secret)

hey hey what’s up my friend so in today’s training I only share with you a simple moving average trading strategy that you can use to profit in bull and bear markets so what is a moving average okay so let’s get down to basics first before we dive in deeper into you know deeper and more advanced concepts so moving average first and foremost it takes into account the historical prices on the chart in fact in every years out the historical prices on your chart and it shows up as a line on your chart so let me explain to you what this means so let’s see the historical price on your chart is something like one two three four and five okay so let’s say the first day the market closes at $1 second a closed at $2 today closed at $3 of their $4 fifty eight $5 so let’s say you use a five period moving average so how would that moving average look like on your chart so what you do is you calculate this total value that you have over here okay 1 plus 2 Plus 3 plus 4 plus 5 the total value is 15 and you divide it by 5 period over here because there is 5 trading days over here and your number then you get write your 5 period Emme here let’s call it the 5 a me on day one and on the the first day that you are doing this so-called calculation it’s equals to let’s see three dollars okay and it shows up as one little blip on your charges 1.

3 dollars all right let’s say this dot over here is $3 then let’s say the second day the market closes at $6 here let’s say qamar 6 so now what you’ll do is you won’t be taking one two three four five six what you’ll do is you take two plus three plus four plus five plus six reason being is because you are using five period moving average so six dollars is the latest closing price you go by you go back five days so it’s just six five four three two right you add all this together and you realize the number is 20 dollars the total but remember moving every every years out the past prices so you take $20 divided by five and you get the number it’s four okay so let’s say this one nowadays on the second let’s see second be over here it’s fall so you have another dot over here let’s dot it as fall okay so you can see right that s this thing goes you know into the future as the price is straight higher in the future you’re connecting dots right we’ll get higher and higher and that’s how you get a moving average on your chart and if the future prices let’s say it goes down lower your moving average starts to slope down lower and lower and that’s how a moving average works that is the concept behind it so moving average right in essence it’s a trend following indicator okay this is important so now that question is right when do you not use moving average well you don’t use moving average in a range markets because this is where you get chopped up and now for example this chart over here you can see this market right is in a range if you apply a moving average in this case it’s a 50 period moving every you can see the price going up and down up and down and up and down and you just get you know chop up and down if you were to use the moving average to you know time your entry or trade with the train etc you wouldn’t work in this scenario okay so now what is the purpose of your moving average and how do you use moving average so clearly moving average you want to be using it with the trend it can help you identify the trend it can help you identify the area of value this is important right this would be one of the key aspect of our trading strategy and I’ll talk more about it later so purpose of moving average to identify the trend trade if the Train identify the area of value there are more to it right for moving average but for the purpose of today’s video for this trading strategy these are the few things that you should pay attention to so now how do you identify the trend with moving average very simple right if you want to let’s say identify the long term trend you can have a very simple statement that says if the price is above the 200 period moving average then the long term trend is up and you want to look for buy opportunities only and if the price is below the 200 period moving average then the long term trend is now and you want to look for selling opportunities or let me share with you a few examples so you can see what you’re this China palladium futures you can see that this is the 200 period moving average what a surprise doing well the price over here it’s a birth above the 200 period moving average so you want to be looking for buying opportunities right buying and for this one over here you can see that euro Canadian dollar this is the 200 period moving average the price over here is below it so what do you want to be doing you want to be selling ok selling right in this market condition and this is how you can actually user a moving average to help you decide whether you should you be buying or selling moving on right how do you identify the area of value when you use moving average so there are few things to know right when the trend is strong the area of value is usually the 20-period moving average in a healthy trend the area of value is usually the 50 period moving average and finally in a with trend where the pullback is you know even deeper the area of value is usually d200 period moving average so let me share with you an example so you can see over here this market right it’s in a weak trend right notice that the price right the area of value it finds resistance right at the 200 period moving average over here this is the area of value right every time this market comes towards the area of value the area of value the area of valued area of value it tends to you know reverse lower from there so for this market condition right in the weak trend it finds an area of value at this r200 period moving average alright and one thing to point out right it’s very important is that I’m using the top area of value I’m not using the term line of value so what you should expect is that the market right there are times where it will not retest the 200 period moving average may become closer in any reverse it comes close in reverse sometimes you might even exceed a 200 MA and then reverse so you have to have this expectations built in into your mind you know kind of expect the market to retest the 200 m e to the correct and then reverse from there doesn’t work that way this is kind of like support resistance right there area on your chart so same thing for this uh area of value the two hundred period moving average they are an area on your chart so whenever you look at this type of you know two hundred period moving average you want to have the notion right there I know this is an area on your chart right and you’re kind of possible to you know treat it as an area maybe you want to share it or highlight it right so that whenever the price comes close to that area you are prime right and ready to look for selling opportunities right and even if the price breaks above the 200 ma by a little bit you won’t think that is broken because again right you’re dealing with an area not a specific line on your chart so another one right you can see that again here aussie dollar respecting the two hundred period moving average this is an area on your chart the area of value and that’s not all right you also have this one over here where the area of value okay the area of value in this case for this market you can see that the area of values and this portion here respecting the fifty period moving average and one thing you notice the difference between this trend and the trend you saw earlier is the steepness of the pullback right this pullback is not as steep right this pullback it’s not as steep compared to the one you saw earlier like you know this is the pullback the pullback the pullback whereas you come back to for example the euro dollar one you notice you saw earlier the pullback it’s much steeper alright a pull back over here it’s much steeper it’s much steeper it’s much steeper so this is why I say that in a weak trend for example this euro dollar the 200 period moving average tends to egg that’s the area of value and in a healthy trend when a pullback isn’t as deep the 50 ma tends to act as the area of value okay so just a quick recap over here I will not talk too much about the strong trend a 20 ma because that wouldn’t be too relevant for today’s training for this particular trading strategy so our concern over here will be more of the 50 ma and the 200 MA moving on okay now this is important I know some of you might be thinking okay Rina it’s easy right to look on hindsight oh you know the price test the MA bouncy amongst a about 0 for 5 times you know on it looks easy to do to see such you know market conditions but in real time is not as easy to you know identify you know whether the market is respecting the moving average or not so how do I know though whether the market really respects the area of value or is it just coincidence so I’m going to share with you a very specific technique right to help you define the area of value okay I call this the minimum of two tests so what you’re looking for is for the market to bounce off the area of value a minimum of two times a minimum of two times right before you conclude that hey know the market is respecting this moving average so let me give you an example right this is a powerful stuff I don’t think I’ve said this before on YouTube so pay close attention so again over here this is the euro dollar chat if i zoom out a little bit okay so you can see that the first time the market fast the 200 period moving average remember it’s an area okay but uh okay let’s let’s make it as the first official test right it’s over here market test at this level one time all right so at this point okay at this point I I may not you know say that hey this market is respecting the two hundred Emmy because this is after all the first test I know some of you might be thinking oh no you know what about this what about this right yes right I mean if you want to take that into consideration right this can be considered a test as well but let’s keep things you know concrete and objective for now we must define right at and right as the market right retesting touching the 200 period moving average so this is the first test okay and the second test came in over here this is the second test okay so the second testing doesn’t have to touch the moving average he just has to come close to it and we’ll treat it as a second test okay and at this point what about here is this the third test yes no my answer is no because the way I define a test is that the price has to break below the swing low before I conclude it as a test so for example over here the market tests the 200 period moving average one time okay then it broke below this swing low the market came down broke below this swing low and retrace up and retest a second time so you can see over here when it retest at a time at this point at this point here okay I don’t consider it a test because he has not break below this swing low over here this swing low must be broken right before I consider it a test so at this point you can see a market at this point yep now it did this one over here you broke below this swing low and now this is the test over here and this is where you’re looking for selling opportunities we will get to that later how do you actually time your entries you know and do to treat the reversal that’s all later on but for now I want to share with you at this technique on how you actually define right the area of value how do you know whether the market respects this area of value or not okay so this is one example another example okay again we’re looking for the to test right zoom back in time for Aussie dollar you can see over here this is the first test where the market touch d200 period moving average again the price has to break below this swing low so it broke below this swing low and retest it a second time this is the second test moving on okay now over here let’s have a look you can see that we have created right this huge downward spike over here so this is where you kind of leave you sub common sensor you carry expect the price to already expect the price of break below this swing low before considering at a test so instead what I’ll do is I’ll look at the closing price instead so this is the closing price and at this point right the test came in over here okay the test right you notice that here it didn’t quite reach the the lows of this close so I won’t consider it a test right I’ll consider this one a test over here as market has now traded below this lows below this close right this closing price right any retest for a time over here okay and again right I will share with you later on how you can actually use it to time your entry right to treat this pullback to pre this reversal towards the downside but a key thing that I’m sharing over here is to how we actually define right where the how do you tell right whether the market is respecting the area of value or not so this to test technique right is what you can do to you know to find out okay so hopefully that makes sense so now I’m going to share with you the specific right trading setup right to trade the moving average trading strategy first thing first we want to have a trending market remember moving average you works best right in the trending market if the market is in a range we don’t use moving average at all that is a three side trading suicide then amateur right we are looking to define the area of value right I like to trade this strategy for a healthy and a week trip because there is a greater profit potential right the swings are wider and there is more profits to be made right in such market condition for the strong trend right you can use this strategy right but you will have to make some tweaks to it right and that will probably be probably a be another video for it right but for today’s video is just focusing on the 50 and 200 ma for your entry trigger we will use a price rejection to signal to us that you know either the buyer’s or seller’s are coming in and then you know we taking the take a position and the for fun right we will exit right at major swing points right trying to capture a swing in the markets so with that said without further further adieu right let’s go back to our charts and have a look so you can see over here okay so it is pointing right I mean you really know how to to define the area of value or how to know whether it holds or not so at this point you can see that this market came back up into this r200 period moving every try and form a strong price rejection for those of you who are familiar with candlestick patterns right you know like shooting star bearish engulfing pattern if you’re not familiar right I have a video below you can check it out it’s free to explain more about this type of a individual patterns right you can see that there is a strong price rejection right on this market so we know that in this market the trend is down the area of value is the 200 ma right notice that we have seen that you know this market has been respecting this 200 AMI and we also have a price rejection over here market at one point of time it treated be above the 200 period moving average people the old breakout is real right let’s buy buy buy and then what happens is that within the same day market trades near the lows and close right near the laws of the days over traders who bought yeah now trip yeah now stuck in the losing position you’re stuck in a long trade so what you’re gonna do is go short right sell this market right in the dissipation of lower prices you know that the trend is down and you know rates from an area of value which is the 200 period moving average so you can sell on the next the big scandal open right which is so in this case this candle open you can sell it over here and your target and I remember I said that you want to tell you that major swing points so major swing points are this levels over here and this level over here there’s up two possible targets right that he can use to exit your winner so if the market does move in your favor okay so this is an example of the trading setup moving on another one Aussie dollar okay so in this case again you can zoom out right I share with you how to define the to test earlier and how to tell whether this Maki know respects the 200 period moving average so from from the looks of this shot yes you know that this market he respects the 200 MA it’s an area of value and it’s kind of similar to the euro dollar strong price rejection over here again right people who bought it there now trap market did a sudden reversal down lower can go shot on the next candle open possible targets right at major string points would be this one over here and this level over here okay so at this point in time right market is going against you again right there will be winners there will be losers I have no idea how this trade will turn out but one thing to share with you is that I usually set my stops right 180 are above this ice somewhere about you okay so the reason I do this is that you know I do understand that there will be retracement against me right and I might get a might get you know stopped up on the retracement right so this is why I want to give the trade more breathing room right I don’t I set my stop-loss just above this highs because the money could come up higher and then reverse lower from there any fine stop-loss is just above the highs I’ll get stopped out of the trade so for example let me give you an example let’s say for traders who who when when shot at this portion monkey came down lower reverse heat above this high so traders if they are shot right and they have not existed the a shot position right the stop losses above this size they were have gotten stopped out on this saddens I mean this pull back over here so this is why I like to set my stop loss right away from the highs and lows in the market and another one to share with you this time around okay let’s just zoom out a little bit and go to this portion over here so it is poor you can see again the trend the long-term trend here is up right and one thing to notice that this market or in this particular market conditioner is actually in a healthy trend is respects right d50 period moving average how do I know that how do I know that right okay let’s do D to test technique so over here market tested the 50 MB once creates higher breakout above this high street answer second time again it didn’t test a moving average to the exact thing or people tick and that’s the thing right we are dealing with an area of values not a specific line of your chat so this I still consider a second test market hits up lower and come back down okay and you see over here it did a test over here and this is the test is where we want a time our entry to go long and we have an entry trigger right this is a bullish price rejection market was at one point trading near the lows and a 50 ma before the buyer stepped in and closed near the highs of the day right so this is a valid entry trigger to go shot absurd to go to go a long right to buy in anticipation of higher prices and again for targets right you can get targeted major swing points which is which is possibly at this swing high over here so one thing to share is a additional bonus technique to share with you is there for healthy trend another technique then you can use right to exit your winners right besides the swing highs or lows is to use a Fibonacci extension because if you if you look back right in this in this side this market condition you realize that often right this market tends to break above the previous high by a little bit then in reverse it breaks the previous high by a little bit then you reverse breaks this one it breaks the previous high by a lot many reverse so you can imagine right now right there that’s a good chance that the market will not reverse at this times he could exit this highs by quite a bit before it pulls the back again but how do you know at which point the market is getting ready to make a pullback so this is where the Fibonacci extension 2 comes into play let’s go here look for Fibonacci her trend besar sorry feedburner trend based feedbacks tension click on this draw it from swinging high to swing low sorry I mean swing low to swing high swing low to swing high can see what I’m doing ok let me just illustrate to you so what I did is that I pull the tool from this swing low to this swing high and I pull it back down here over again and what you see is that there are a few numbers popping on right you have the 127 extension the 162 extension and 2.

0 extension so where you wanna take profits are depending on how aggressive or conservative you want to be I was in the 127 and 162 extension are possible levels right to take profits alright so if you are more conservative for you you don’t want to know in for a huge home run you can look for targets right at is 127 extension so this at this level over here is where you look to exit your swing trade it is 127 extension okay so this is how it works so you can see over here if your TPS that is 127 extension or even 162 you will likely hear or get a feel on this trade right so again the Fibonacci extension tool right can help you capture a bigger swing in a healthy trend okay and finally right finally one last thing or another example on the share with you is this one over here okay it’s another another concept so what this one over here is the tea bond futures you can see that over here again this market it respects the area of value which is the 50 period moving average healthy trend okay over here tests at once breaks out higher throughout the prior high recess a second time breaks up higher and now it’s back here for at a time at this point and if you realize at this point there really isn’t any strong bullish price rejection I mean yes you might argue that here right now we have a couple of you know higher close over here right closest higher closes hi but in terms of the price I wouldn’t really say it’s very convincing compared to the ones we saw early on euro dollar or Z dollar or even D a 50 so another technique that you can use is what I call the trend line break so instead of using a candlestick patterns to time your entry you can use trend line the break of trend line to time your entry so what you’ll do in this case is just pull out a trend line connect it or get from their highs okay let me just draw my trend line from here all the way down okay and notice that at this point this candle has broke break and close above the trend line and that was another type of entry trigger you can use right to get a but the long trip right to buy in this market condition and again since this is a healthy trend you could you have different ways to exit the trade number one could be a major swing points or number two you can use the Fibonacci extension to swing low to swing high and you pull it back to the swing low and again 127 or 162 level of possible targets try to to exit your swing trade all right so hopefully there are these few examples I give you an idea on how to actually know or trade this particular moving average trading strategy so now before I already give you a bonus advanced technique how do you actually improve your risk to reward right on this particular trading strategy okay so that’s interesting so how you do it is you will use multiple time frame analysis let me explain okay so this is again the same shot you saw earlier on euro dollar and you know that it’s respecting the 200 period moving average okay so so traditionally traditionally how you you will you know trade this market is that you will go short right let’s see a big scandal open okay your stop-loss is 180 are above this high so let’s say somewhere about let’s see somewhere here okay and as for targets okay as for targets right let’s say this is a swing low your target is at this point so over here you have about a one to one point two to risk/reward ratio we can see over here right risking a dollar to make a dollar at twenty two cents you know pretty decent but is there a way to kind of you know improve on this all right in the answer is yes you can and you have to use a multiple time frame analysis for this okay so how you do it is that you want to go down to a lower time frame like D for what time frame which I’ll do right now so on the for what time frame okay let me just get rid of the AME you’ll notice that this market right on the pullback informs a series of higher highs and higher lows okay higher highs and higher lows right this is a common sense so what you’re looking for is for a break of structure right you know that the long-term trend is down you know that you are trading at an area of value at a 200mb so you want to enter on the first sign where the market is showing you that hit on the sellers are in control and they are about to take the price lower so you’re looking for a break of structure so what is a break of structure so over here you have a series of you know higher highs and higher lows so what you’re looking for is a series of lower highs and lower lows telling you that hey now the sellers are coming in and about to take the price lower so where did the lower high and lower look come in so this is where it first appear at a low or high over here and a lower low so at this point what you can do is that you can look to sell when the price breaks below this swing low plus at this point right you would have a lower high and lower low on your chart right you can look to sell when the price breaks below this swing low and because you’re on this lower timeframe right you can use the lower timeframe market structure to set your stop loss okay so earlier if you recall right your stop loss was actually 180 are above this highs over here on the daily timeframe so what you can do now is use the lower timeframe market structure to set your stop loss so let’s see again now we went shot on this break of this lows stop-loss now again 180 are above this high somewhere about here let’s say here okay and it’s not targets we can use the same targets that we had seen earlier on the daily timeframe the major swing low which is at this portion over here so if I just pull this down somewhere about here you can see that now your risk to reward has improve right right now you’re risking a dollar to make two dollars your analysis your bias on this market is all the same the only thing that you are doing the is to get a tighter stop-loss which improves your risk to reward your entry point is pretty much a similar level right slightly uh had a slightly lower price your stop-loss is a is that a tighter level because you’re using mock instruction on a lower timeframe but your target is at the same point same swing point that you’ve identified earlier a higher time frame and this Technic right will allow you to you know improve right your wrist reward right for your traits this is the advanced stuff because you’re using multiple time frame but hopefully I give you an insight right into how this works okay so again right take time to digest this and really watch this video if you need me right because this is stuff that you need time need experience to understand it so with that said let’s do a quick recap to what we have this covered today all right number one avoid using moving average in arranged markets right it’s suicide right because you’re just gonna get chopped up and down moving average can be used to identify the trend in the area of value which is what we have covered today and in fact there’s more you can even use it to trailer stop-loss identify relative strengths but those are stuff for another day right it’s not too relevant to the strategy that I just share with you then to find out whether a market respects the area of value of moving average or not we talked about the minimum of two tests to confirm the area of value then the trading strategy is something like you know the trend identified the trend the area of value and the entry treater ng trigger can be you know reversal candlestick patterns like your hemorrhoid shooting star bullish engulfing or sometimes when there is a reversal candlestick patterns you can use stuff like a trend line break as well which we have talked about earlier and finally right I talked about how we can use the lower timeframe right to improve your risk to reward on the trade okay so I hope this helped I hope you got value out of it if you’ve enjoyed this video hit the thumbs up and subscribe to my youtube channel if there’s any topic that you want me to cover leave it below in the comment section right and if there’s topics that there is a huge demand right I’ll consider it or do it a video on it as well so that’s it I wish you good luck and good Freddy I will talk to you soon you

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