5 SMA and 5 RSI Forex Swing Trading Strategy

This is a swing trading strategy that is great for beginners because this system is comprehensive. This works on a 1-hour and above timeframe and is applicable to any currency pairs.

Metatrader Indicators:

• 5 SMA & RSI (Set settings to Period 5)

Trading Rules:

5 SMA indicator is for identifying the trend.

Downtrend: The price is below the 5 SMA.
Uptrend: The price is above the 5 SMA.

RSI is for confirmation. The RSI is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions. It ranges from 0 to 100. A currency pair is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the currency pair may be getting oversold and therefore likely to rally.

Buying Rules:

1. The price must cross over 5 SMA in an upward direction and closes more than 10 pips.
2. The RSI must be above RSI 50 line.
3. Buy or place a buy stop order 2-5 pips above the high of the candlestick.
4. Place your stop loss about 5 pips below the low of the candlestick.
5. Take profit at 1:3 ratio or exit at the previous swing high.

Selling Rules:

1. The price must cross over 5 SMA in a downward direction. and candlestick must close more than 10 pips.
2. The RSI must be below the 50 line.
3. Sell or place a sell stop order 2-5 pips above the high of the candlestick.
4. Place a stop loss about 5 pips above the high candlestick.
5. Target profit is at 1:3 ratio or at the previous swing low.

ADVANTAGES:

• Comprehensive and can gain more than 100 pips when trading on a larger timeframe such as 1-hour, 4 hours and daily timeframe.

DISADVANTAGES:

• It is bad to use during ranging or non-trending market.
• There are many false signals.

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