THE MOVING ENVELOPES TRADING STRATEGY
"Moving Averages can be a great tool for determining the master trend but also to signal trades by using the Moving Average Envelopes"
■ Style: Swing Trading Strategy
■ Name: Trading the Moving Envelopes Strategy
■ Forex Majors | ■ Metals and Energy | ■ Stocks | ■ Indices
■ H1 timeframe (1-Hour)
INDICATORS & SETUP
This strategy is applied using two Moving Averages and the ADX
In order to create the envelope, you need two simple moving averages (SMA). Any signal generated by the SMAs is confirmed using the Average Directional Movement Index (ADX)
1. Two SMAs (Two Simple Moving Averages)
SMA-1 (fast): choose 9 periods
SMA-2 (slow): choose 21 periods
2. Average Directional Movement Index with Meta Trader 4 default
setting (ADX 14). A level of 40 is added.
This is how you may implement the Trading the Moving Envelopes Strategy
■ (↑) Long Trades
If the fast SMA (9 periods) crosses above the slow SMA (21 periods) you get a Buy signal. Confirm this signal with a falling ADX. A falling ADX indicates that the market volatility is falling and that may be good news for an upcoming bullish market.
■ (↓) Short Trades
If the slow SMA (21 periods) crosses above the fast SMA (9 periods) you get a Sell signal. Confirm this signal with a rising ADX. A rising ADX means that the market volatility is rising.
■ Take Profit: 240-300 pips | ■ Stop-Loss: 80-100 pips | ■ Profit/Loss Ratio: 3
CHART: MOVING ENVELOPES (EURUSD)
■ Trading the Moving Envelopes Trading Strategy