How to use moving averages ( creating a trading strategy )

"So, if you were to add three moving averages to your chart to determine trend, your rules could be when the 20 is below the 50 and the 50 is below the 100, we are in a downtrend. There could be your first rule for a strategy. Your second rule could be when the another situation could be when the 20 period is in between the white 50 and the blue 100, then we are in consolidation and you don't look for trend continuation trades while in consolidation. Again, these are just examples of some rules you could create around moving averages. And here you see that the 50 and the 20 are above the 100. And there is a non-subjective rule for being in an uptrend. So now you have a non-subjective rule for downtrending markets and a non-subjective rule for consolidation when the 20 is in between the 50 and the 100 and a non-subjective rule for an uptrend based around that. You can create an entire trend continuation strategy. So what you can say is and these are just examples. These may not be strategies that I've actually tested, but you can say if my moving averages tell me we're in a downtrend. We have the 100 with the 50 below and the 20 below that telling me we're in a downtrend. Then I sell the 20 period moving average every time the market touches it."

"Here is another example of something that would be testable when I have all three moving averages lined up in a downtrend and the market pulls back but does not reach the 50 period moving average. And guys, you could write this down as notes and really test these strategies to see if they're profitable. But anyway, when this is the case and we have our moving averages lining up plus we have price action that has not touched the 50 period moving average. Now I look for breakout trades ascending triangle with a breakout to the downside."

"Now, the 100 EMA, I've noticed throughout back testing, is one of the best to trade off of. So, if you'll notice here, the market has been in a heavy downtrend. Once we actually retrace all the way up to the 100 EMA, that 100 EMA sometimes does push the market back down pretty dramatically. And again, we break above the 100, come down to the 100, and market is pushed up by that 100 EMA. This is especially true when the 100 EMA lines up well, let me make that a different color. Sorry, guys. Lines up well with previous structure. So here we have a 100 EMA, one, two, three, four, five different points of structure that have been tested at the same level. And the market is rejected off of that level and that 100 EMA. So there's another good trading strategy that's testable, verifiable, and repeatable, which are rules that I like to use for any of my strategy creation."

"So, you could take our RSI down here in combination with our 100 EMA. We already know from the previous pair we were looking at that the 100 EMA is sometimes respected as support or resistance in trend. So, as you can see, the market is trading above the 100 EMA. we pull back down to the 100 EMA. And when do we want to buy off of the RSI? Well, based on the relative strength index, we would like to buy when the market is oversold. So, let's combine the two as a rule for a strategy and see how it would have performed. As you can see here, market in an uptrend, pulls back to the 100, which we know sometimes acts as support. We look down on the RSI. Here we are as we pull back. And if we go straight down, you can see on the RSI here, we are oversold on the RSI when we pull back into the 100 EMA. There are two really good conditions that you could use in order to create a strategy. Now, remember what we said before, conditions are not all you need to create a strategy. Now, we have conditions. What do we need next? rules for entry. So, a non-subjective rule for entry for this specific strategy could be when the market breaks back above the 25 line on your oversold. So, when the market goes from oversold and comes back out of oversold on the close of the candle that's out of oversold, you could enter the market. There's your reason for entry."

"In order to create a successful trading strategy, you need a certain set of conditions followed by a set of rules for entry. So for example, our condition one would be the moving averages lining up in this way showing us our non-subjective downtrend. Now that we have condition one met, which is the moving averages, now we need to create a rule for entry. or rule for entry could be a number of different things and that's for you to decide and test for."

"So condition one, market trades under 100 EMA. Condition two, pull back to 100 EMA. Condition three, market goes overbought. Entry reason, market comes out of overbought. Guys, this is a strategy that is testable, verifiable, repeatable, and has everything you need for it to be an a successful forex a successful trading strategy if you commit to testing it."