(+) Swing Trade Strategies

THE MOVING ENVELOPES TRADING STRATEGY

Moving averages can be a great tool for identifying the master trend and signaling trades by using Moving Average Envelopes.

 TRADING STRATEGY

■ Style: Swing Trading Strategy

■ Name: Trading the Moving Envelopes Strategy

FINANCIAL ASSETS

■ Forex Majors | ■ Metals and Energy | ■ Stocks | ■ Indices

 TIMEFRAME

■ H1 timeframe (1-Hour)

 INDICATORS & SETUP

This strategy uses two Moving Averages and the ADX.

To create the envelope, you need two simple moving averages (SMAs). Any signal generated by the SMAs is confirmed using the Average Directional Movement Index (ADX).

1. Two SMAs (Two Simple Moving Averages)

Settings:

• SMA-1 (fast): choose 9 periods
• SMA-2 (slow): choose 21 periods

2. ADX

At a Glance: ADX

The ADX (Average Directional Index) measures the strength of the trend (not direction) on a scale from 0 to 100. Values below 20 suggest a weak or sideways market, readings above 25 indicate a strengthening trend, and levels above 40 reflect strong momentum. It is commonly used alongside the +DI and –DI lines to determine the trend’s direction.

Settings:

• MetaTrader-4 default settings (ADX 14)
• Level 40 is added

 TRADING SIGNALS

This is how you can implement the Trading the Moving Envelopes Strategy:

■ (↑) Long Trades

If the fast SMA (9 periods) crosses above the slow SMA (21 periods), you get a buy signal. Confirm this signal with a falling ADX, which indicates decreasing market volatility—often a positive sign for an upcoming bullish trend.

■ (↓) Short Trades

If the slow SMA (21 periods) crosses above the fast SMA (9 periods), you get a sell signal. Confirm this signal with a rising ADX, which indicates increasing market volatility.

 TRADING ORDERS

■ Take Profit: 240-300 pips

■ Stop-Loss: 80-100 pips

■ Profit/Loss Ratio: 3

CHART: MOVING ENVELOPES (EURUSD)

■ Trading the Moving Envelopes Trading Strategy

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