50 and 200 SMA Daily System

50 and 200 SMA Daily System is a trend following strategy suitable for any currency pairs.

Timeframe: Daily.

For some reasons, 365-period Simple Moving Average (SMA365) often acts as a price

magnet & major support/resistance. Why? I don’t know. I just know it works. And we can

use it to make profits from the markets.

In this system, we use the following components:

1. 50-period Simple Moving Average (SMA50) applied to the Close.

2. 200-period Simple Moving Average (SMA200) applied to the Close.

3. 365-period Simple Moving Average (SMA365) applied to the Close

Entry Rules for Long Trades

Two conditions must be fulfilled:

1. SMA50 is above SMA200

2. We’ve got a bullish engulfing pattern or a hammer pattern form at/or near SMA65.

Entry Rules for Short Trades

Two conditions must be fulfilled:

1. SMA50 is below SMA200

2. We’ve got a bearish engulfing pattern or an inverted hammer pattern form at/or near SMA65.

Stop Loss

For long trades, stop loss should be placed at the nearest support.

For short trades, stop loss should be placed at the nearest resistance.

Exit Rules for Long Trades

Exit when price stalls at major resistance, trendline, pivot points, Fibonacci projection

target.

Or when bearish engulfing patterns or inverted hammer patterns form.

Exit Rules for Short Trades

Exit when price stalls at major support, trendline, pivot points, Fibonacci projection target.

Or when bullish engulfing patterns or hammer patterns form.

We have a nice downtrend. And SMA50 crosses below SMA200.

Then price retraces, and touches SMA65 (the dark blue line). A bearish engulfing pattern then forms. We enter our short trade.

We exit our short trade when a hammer pattern forms.