Trend Following with Three Simple Moving Averages

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.

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:

1. Trend: The 26 SMA crosses the 100 SMA from bottom to top.
2. Trigger: The 13 SMA crosses both the 26 and 100 SMAs from bottom to top.

Short Entry (Sell)

Look for a perfect bearish alignment:

1. Trend: The 26 SMA crosses the 100 SMA from top to bottom.
2. Trigger: The 13 SMA crosses both the 26 and 100 SMAs from top to bottom.