Sunday, June 7, 2020

How to use Simple Moving Average wisely in Trading

How your $5,000 can generate you $54,997, a whopping 113% profit in 78 days using Simple Moving Average?

https://www.tradingview.com/x/eJFQTFe7/

Simple Moving Average can work wonders if you know how to use it wisely in your trade. Although a lot of traders they despise this indicator because they believed that it lagged behind from the actual price action. Let us try to examine by having some few sample stocks that we can implement the SMA (Simple Moving Average) on it.

Let us try to see the scenario with AMD on Jun 12, 2019
Here we use 3 Simple Moving Averages: (20SMA, 50SMA and 200SMA)

Setting Indicators on TradingView.com
Add 2 indicators called MA cross

  1. MA Cross 1: Inputs ( 20, 200) ; Style (Red [MA20], Orange [MA200], Red [Cross]);
                          Plot Background Color 0, faded Green
                          Plot Background Color 1, faded Red  
  2. MA Cross 2: Inputs ( 50, 200) ; Style (Blue [MA50], Orange [MA200], Blue [Cross])
                          Plot Background Color 0, faded Green
                          Plot Background Color 1, faded Red  


Setting up the Trade.
The objective of this scenario is to find the best set-up that would help a trader to have a big win. The set-up is simple:

  1. 20SMA should breaks out above 200SMA
  2. 50SMA should follow the 20SMA and breaks out of 200SMA
  3. 20SMA after break out from 200SMA should be on top of 50SMA and 50SMA on top of 200SMA
  4. 20SMA break-out should be at least 197 days from previous break-down 
  5. 50SMA break-out should be at least 216 days from previous break-down.
  6. Pullback occurs on 20SMA. Price touches or breaksdown 20SMA 13 days after 50SMA breaksout of 200SMA.
   Calculation of Target Price

SMA CROSS Patterns

SE: 2019/02/27 Gap-Up and Breakout, N78
Set-up: https://www.tradingview.com/x/pvBkh8gG/
Outcome: https://www.tradingview.com/x/Fmi6CmIw/

AMD: 2018/07/26 Gap-Up and Breakout, N78
Set-up: https://www.tradingview.com/x/TtZtW9KS/
Outcome:  https://www.tradingview.com/x/185qrzRQ/

XPEL: 2018/05/23 Gap-Up and Breakout, N78
Set-Up: https://www.tradingview.com/x/uEmE4Nkl/
              https://www.tradingview.com/x/ZHkQclkQ/
Outcome: https://www.tradingview.com/x/sZY3GIJ4/

ENPH: 2019/05/01 Gap-Up and Breakout, N78
Set-Up: https://www.tradingview.com/x/l0snM2rR/
Outcome: https://www.tradingview.com/x/IxBwWmkf/

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