One of the most popular moving average tools used for technical analysis is called the Simple Moving Analysis (SMA), and for good reason too. That said, trading using SMA indicator does have its drawbacks, specifically when you use only one. The main disadvantage is that a single SMA could have a resulting lag, due to the fact that SMA doesn’t take many previous price points when calculating the average. On the other hand, using 2 SMA indicators on the same chart will issue great trade entry points.
This guide will teach you how to use the SMA4 and SMA30 to trade 5 minute long positions on the Binomo platform. Remember, this is very important when trading using SMA indicator!
Setting up SMA4 and SMA30 on Binomo
After logging into your trading account, the first thing you have to do is to set up your Japanese candlesticks chart to 1 minute. After that, select Moving Averages from the Indicators panel. A new window will pop up. Change the type to ‘SMA’ and set the period to ‘4’. Lastly, change the color of the SMA4 line to your preferred color, like blue, for instance.
To set up the SMA30 line, simply repeat the process, this time changing the period to 30 and the color to red. Again, you can choose any color you want, but I personally prefer using red and blue so that they’re easier to distinguish from each other.
When you’re done setting it up, click apply in order to save the changes. Make sure that your candlestick chart is on the 1-minute timeframe before you start trading.
Trading using SMA indicator pair on Binomo
Your chart should look similar to the below screenshot after you’ve set everything up. You can double-check to see if you’ve entered the correct settings before trading.
You can use the SMA indicator to let you know the best trade entry points on the chart. Be sure to familiarize yourself with the movements of the two lines.
How do you know when to enter a buy or sell position? It’s simple. You simply have to take a look at how each line cuts the other.
For example, you should get ready to enter a 5-minute buy trade when the blue line, that is, the SMA4 line, cuts the red line, or the SMA30 line, from below and starts moving over it. Once the blue line touches the first green candle, you should enter a 5-minute buy position immediately. In the chart above, you can see this symbolized by the green arrow pointing upwards.
On the other hand, you should get ready to enter a 5-minute sell trade when the blue line cuts the red line from above and starts moving under it. Similar to the above scenario, you should enter a 5-minute sell position immediately once the red line touches the first red candle. In the chart above, you can see this symbolized by the red arrow pointing downwards.
This strategy works really well when the markets are trending, such as in cases of high volatility. As such, even beginner traders can use this strategy to trade profitably on their demo accounts, provided that the timing’s correct. One good example is after a news release related to the specific asset you’re trading. During these moments, trading using SMA indicator is very effective for completing winning trades.
Interested in trying out this new strategy? Be sure to sign up for a free Binomo practice account now! And if you have, don’t forget to let us know all about your experience in the comments section below.
Good luck on your trading journey with Binomo!