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Wednesday, 7 August 2019

Achieve Take Profit Targets with Moving Average Indicators

Speaking of entry techniques (open positions), there are lots of trading signal instructions. However, entry techniques alone are not enough if they are not supported by exit strategies. That is, after we open a position, we must also measure at what price level the position will close. Therefore, here are guidelines for successfully achieving the Take Profit target with a popular and simple indicator, which is Moving Average.

Entry Methods With Moving Average Indicators
Yes, before getting profit, we must open a position first based on trading signals from the following Moving Average indicator techniques:

1. Crossover Technique

This technique is the entry method with the simplest Moving Average (MA) Indicator, and also the most popular. In short, trading signals will appear when there is an intersection between one MA line and another MA line. This method can be used on any pair and timeframe, but ideally, the most accurate trading signal in trending market conditions.

Unfortunately, the crossover technique is lagging because it depends entirely on the intersection of MA lines. So, trading signals are usually triggered just after the price has moved far away, as a result you can open a position late.

2. Bladerunner Technique

This technique is called "Bladerunner" because the Moving Average line moves to cut the price bar chart into two parts. Trading signals appear when prices move away from the 20-period EMA line and then retest the price limits. After the price tests the limit, most likely the price will move back to continue the previous trend.

sell signals appear after a long period of consolidation (sideways). Next, the price starts to move down as the beginning of a downtrend. On that occasion, traders can open short positions when the highest bar (candlestick) tries to test the 20 EMA line, but has not been able to break it.

On the contrary, the signal to open buy positions appears when the candlestick's lowest bar tries to test the 20 EMA line, but still fails to penetrate it.

3. Envelope Technique

The envelope technique is also known as MA Envelope as one of the default indicators of MT4. This MA Envelope at a glance looks like a Bollinger Bands indicator display, where two Moving Average lines are paired parallel to one MA line.

The MA Envelope indicator can give traders instructions for entry when the price starts to touch the outside MA line (blue MA line). Simply put, a buy or sell opportunity arises when the candlestick touches the outer ring line, just like a trading signal with Bollinger Bands.

Also Raed  : Reading Stochastic Indicators According to 3 Kinds of Functions

Guidelines to Achieve Take Profit with Moving Average Indicators
Now, if you already understand how to translate signals to open trading positions, then we will discuss the exit strategy. Once again, we must adjust the exit strategy so that the Take Profit target can be achieved optimally. Because without planning to close a position, it's the same as trapping our own account if the price turns out suddenly.

Before determining the Take Profit target, ideally we must also set a Stop Loss limit. Simply put, the Stop Loss limit will close a position with a floating minus at a certain price level before the loss gets bigger.

Here is a practical way to determine the Take Profit and Stop Loss limits using the Moving Average indicator:

1. Use various combinations of indicators to clarify the quality of trading signals

Basically Moving Average is a lagging indicator, so trading signals usually only appear after prices form a trend. The problem is, no one knows exactly how long a trend will last. It could be in a short period of time, the price turned out to be corrected or even reversed sharply (reversal).

In the example of the EUR / USD H4 chart above, the EMA 20 indicator (bladerunner technique) is combined with two MA envelopes as a limit of resistance and dynamic support. After a buy signal is detected, an entry is executed at the opening candlestick price which is 1.110. Next, Stop loss is set at the level of 1,104 and Take Profit at 1,115.

As a result, profits were 116 pips in the vs. ratio. reward 1: 1.

2. Use the help of other indicators to find out the strength of the trend

In addition, the CCI indicator and the RSI indicator can also be used to determine overbought and oversold conditions in the market. Overbought and oversold conditions can be used to measure the extent to which the trend will continue.

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