Dual SMA – SMA-4 and SMA-30
SMA is one of the most popular indicators in technical analysis. Even so, an individual indicator has its drawbacks. The main reason is due to the signal delay of the SMA formula, it is not affected much by the most recent fluctuations.
And to compensate for this defect, you can use the dual SMA: SMA-4 and SMA-30 Strategy. This article will show you how to use SMA to place an exact 5-minute position.
*This article will use images of the Olymp Trade broker for easy visualization.
How to install SMA indicator
Depending on the interface of the broker you are joining, you will have to set two SMA lines with parameters 4 and 30. Here I use the interface of Olymp Trade.
Click on the pencil icon right next to the indicator name to adjust the settings.
Entry signals for the double SMA strategy
The SMA-4 indicator line will take the last four candlesticks to calculate so that you can clearly see the short-term trend. On the contrary, the SMA-30 uses 30 previous values, giving the market trend direction. While the SMA-30 does not place a strong on sudden fluctuations near the present, the SMA-4 will run very quickly, representing an attempt to bull or bear the SMA-30 in its right direction through very volatile movements.
Set an Up / Buy order
At a time when prices are trending down, preparing to reverse to increase will have the following signals:
- SMA-4 cuts SMA-30 from below.
- The SMA-4 moved above the SMA-30 continuously and moved up after cutting. At this time, the SMA-30 also started to reverse to increase.
You should buy at the moment the SMA-4 hits the bottom of the first green candle. If, after cutting, there is no phenomenon of touching the bottom of the green candle, you should not set order because the signal is not clear right now.
Put a Down / Sell order
In an uptrend about to come to an end, near the point of a beginning of reversal often happens:
- SMA-4 cuts SMA-30 from above.
- Then the SMA-4 continuously moved below the SMA-30, and at the same time, the SMA-30 started to reverse.
The best time to buy is when the SMA-4 hits the top of the first red candle. If after cutting, there is no phenomenon of touching the top of the red candle, you should not place orders, because the signal is not clear.
There are always ambiguities in the trading process. You need to practice to have good skills and be able to use a variety of strategies.