Everyone who has ever encountered trading in the financial markets knows what the Moving Average is. This classic technical indicator is so widespread that it is found in almost every trading system. You can learn more about this in the What is Moving Average indicator or Moving Average forex strategies article.
Strategies do not have to be complicated to be effective. You do not need a list of 20 rules to enter the transaction. This article describes an indicator 3 moving average crossover strategy that has become a classic. It uses the intersection of a triple exponential moving average. This is not to say that it does not work. It works; however, it has disadvantages that lead to losses.
The intersection of three moving ones is a stronger signal
There is a 3 moving average crossover strategy of crossing three moving averages to amplify the input signal. It allows you to filter out a lot of noise in the market, but you will have to pay for it in that you have to skip the beginning of the trend a bit.
A buy signal is the intersection of the fastest moving two others. In this case, the requirement is that all EMAs are directed at an angle in one direction: either up for a buy signal, or down for a sell signal.
It is easy to see that such a 3 moving average crossover strategy allows you to enter into such global trends, where you can make 20-50% of the profit.
Pros and Cons of 3 moving average crossover strategy
Crossing moving averages is a simple and straightforward triple moving average crossover strategy. Moreover, it works well in trending markets where there are long and directional movements.
Minuses
- Ineffective during flat periods
- Signals come with a time delay
Low profitability
- Poor for trading on currency pairs
In the simplest case, you can trade with one Moving Average (only intersections with a price chart or determination of a local trend depending on whether the price is higher or lower) are taken into account. Still, a complete picture can be obtained by relying on 3 moving averages. This solution allows you to determine the presence and direction of the trend, or rather enter the market and evaluate the potential of the emerging price impulse. In this topic, we talk about the most profitable strategies based on the triple exponential moving average and give examples of their use in real market situations.