Traders are constantly looking for various trading strategies that can bring them profit. At the same time strategy should be simple enough for even beginners to understand and help them make profitable trades. We are presenting such strategies in our Olymp Trade strategy series of articles. In this article we write about trading technique that is called “trading on moving average”. As it’s name says, it is based on moving averages from different periods and it has a high probability of making the right trading decision.
Trading With Moving Averages – Introduction
Moving averages are represented by lines on your trading chart. They represent price averages for certain periods. They can be one minute moving averages, five minute moving averages or even one day or two day or more day moving averages. Time component of moving averages really depends on trader’s needs. If you are making trades within minutes you will select moving averages that are appropriate for that trading period. Everything will become much clearer after the example that you can read in continuation.
Moving averages repeat the price movements of the chart, but they are not taking into account random fluctuations. Thanks to these lines you can clearly see in which direction the price is changing. They are great tool for recognizing trends. Once you recognize trend in the making it is easy to trade in the right direction and make profit.
Why are we using two moving averages with different time periods that are represented with two lines on trading chart? Well, the essence of this strategy is that as soon as the first “moving average” crosses the second, you get a clear signal to open a trade either put or call. One moving average must have longer period and the other one must have shorter period that needs to correspond with expiration period of your binary option.
Olymp Trade Strategy – Indicator Setup
To start working on the strategy you will need to open a window with technical analysis. You can find it without a problem on Olymp Trade trading platform. Open it on the chart of assets you are going to trade. It’s recommended to trade on currency pairs EUR/USED, EUR/JPY, GBP/USD or gold. Also bear in mind that it is easiest to achieve great results if you trade during European session (09:00-12.00 Moscow time) and American session (15:00-19:00 Moscow time). You can read more about trading sessions in our article Olymp Trade Strategy – Trading By The Hour. It’s best to abstain from using this strategy when markets are calm. This usually occurs between 20:00 and 08:00 Moscow time.
So, open the schedule with a time period of 1 minute. In the list of available indicators, select Moving Average.
Enter the following parameters for this line (we will call it “slow”):
Length = 60
Source = hl2
Offset = 0
Put another moving average on the chart, this time with the following characteristics(we will call it fast):
Length = 5
Source = hl2
Offset = 0
Olymp Trade Strategy – Trading Using Signals Generated By Moving Averages
Once everything is set up we start receiving signals and it’s time to trade! On the chart below blue line is slow and the green line is fast. As soon as these lines intersect you get a signal to open a trade. The expiration period of trade should be set to 5 minutes. This is optimal time which will help you to make profit
Put option should be opened when the fast line moving average (green) crosses the slow line moving average (blue) from top down.
Call option should be opened when the fast line moving average (green) crosses the slow lne of moving average (blue) from bottom up.
As you can see in this example, the opening signals appear constantly on the chart. Each intersection of slow and fast line can be a good signal for opening a profitable trade. Please note that it doesn’t make sense to open a trade while lines are wide apart, you need to wait for one of them to cross the other.
Trading With Moving Averages – Conclusion
Moving averages are great asset for any trader. They are one of most commonly used tools for generating signals. Watch closely for intersections and be ready to react fast to open trade on time. Very soon you will learn to quickly navigate through the chart and clearly notice great moments to purchase binary options! This may seems as super simple way of trading and truth is, it’s not complex, but still, make sure you practice this strategy if you are new to trading. Great way to practice is to open demo account at Olymp Trade. All you need to do is to click on the button below the text, go over to Olymp Trade web site and create account. You don’t need to deposit any money until you are ready to trade for real. If you are looking for more interesting trading strategies you can read our articles: Binary Gambit, Ladder Trading and Trading By The Hour. If you are looking for more information about Olymp Trade make sure you read our comprehensive Olymp Trade broker review.