SMA is very useful to indicate up and down trends. Setting the period which tells the indicator the number of historical bar, using which OHLC (Open, high, low or close bar value) and the calculation method (Simple, exponential, etc), will give you different trend indicator curve.
While this is good, lets look at how to program different way of entry to buy/sell to maximize usage of SMA.
Attached the same chart, which includes a red colour line SMA (24 periods, Close, Simple) on a EURCHF chart on 1 Hour time fame. The logic to pick up a down trend is still 6 hours gradient at >20 pips and currency close bar is above the red line.
1) Entry when the currency value goes above the red line.
There will be no trade from 15 to 16 Dec despite the currency value goes above the red line as the gradient is less <20 pips over 6 hours.
A sell trade will execute on late 20 Dec as the currency went above the red line which is about 1.2695 EURCHF. And will take profit at 1.2595 (assuming a profit take of 100 pips) on 21 Dec 1100hr. (A stop loss setting at 1.2795 which never hit).
And no further trade for this week.
2) Entry when the currency low bar value is lower then the previous low bar value by >10 pipes
There will be no trades from 15 to 19 Dec.
On 20 Dec 0300 hours a buy trade will execute at 1.26150 EURCH. And will take profit at 1.25150 (assuming a profit take of 100 pips) on 21 Dec. (A stop loss setting at 1.27150 never hit).
Another sell trade will execute at 22 Dec at 1,24803 but will stop out at 1.2580 at 23 Dec (assuming stop loss 100 pips), due to the reverse in the trend.
3) Entry when the bar Open and close is less then 10 pips. It will show on the chart a short bar.
A sell trade will execute on 20 Dec at 1.2670 and take profit at 1.2570 on 21 Dec 1100hr. (Assume stop loss 100pips at 1.2770 never reach).
Another sell trade will execute on 21 Dec 2200hr at 1.2562 and take profit at 1.2462 on 22 Dec 1500hr (assume stop loss 100 pips at 1.2662 never reach).
There are many methods to program the entry of executing a buy/sell trade using SMA indicator. Its really up to the trader to define which is best suit for the currency at that particular time frame.
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