Trend Following with Three Simple Moving Averages
This is a classic trend-following strategy that utilizes the hierarchy of three Simple Moving Averages (SMA) to filter noise and identify strong directional momentum. By stacking long-term, medium-term, and short-term trends, traders can enter high-probability setups with a clear directional bias.
Strategy Profile
Timeframes
H1, H4, D1
Pairs
All Major Pairs
Indicators
3 SMAs (50, 20, 5)
1. Indicator Setup
Apply the following Simple Moving Averages to your chart to establish the trend hierarchy:
- Long-term Trend: SMA 50 (Green).
- Medium-term Trend: SMA 26 (Blue).
- Signal Line: SMA 13 (Red).
2. Entry Rules
Long Entry (Buy)
Look for a perfect bullish alignment:
- Trend: The 26 SMA crosses the 100 SMA from bottom to top.
- Trigger: The 13 SMA crosses both the 26 and 100 SMAs from bottom to top.
Short Entry (Sell)
Look for a perfect bearish alignment:
- Trend: The 26 SMA crosses the 100 SMA from top to bottom.
- Trigger: The 13 SMA crosses both the 26 and 100 SMAs from top to bottom.
Exit Strategy
Close the trade immediately when the 13 SMA crosses back over the 26 SMA in the opposite direction.
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