The Three Moving Average Trading Strategy
The Moving Average is a proven trend tool. Many indicators have been created on its basis and they make it possible to find the best points in which to enter the binary options market. In addition to the well-known developments, there are also private solutions created by amateur traders. A large catalog of custom indicators is available on the TradingView technical analysis platform. In this article, we will look at a strategy using two tools – a triple Moving Average and a modified version of the MACD.
Overview of the indicators and the strategy
AK MACD BB INDICATOR – as you can tell from its name, this tool is a kind of hybrid of two very popular indicators (the MACD and the Bollinger Bands). You can also tell from looking at it. In this article, we aren’t going to analyze the purely mathematical nuances of the calculation formula. In fact, this indicator is the MACD building in parallel with the Bollinger Bands. There are no histograms here, since not two, but one moving average is used as a sequence of multiple points.
Three Moving Averages – this is a combination of three Moving Averages, which is also quite clear from the name. There is nothing really innovative to notice here, but we can say that this type of Moving Average curve works perfectly in this combination. That’s why this indicator has gained so much popularity among TradingView (https://www.tradingview.com) users. It has scored more than 7,000 likes, which is quite a lot, thanks to which TEMA is at the top of the list of popular user tools.
Setting up the terminal for analysis
In most cases, chart analysis of the market and the trading itself are carried out on different platforms. The functionality of the binary options broker web terminal is limited for trading, so the best solution is to use the live chart from TradingView. The trading terminal opens in the next browser tab, and it is fully prepared for quick opening of trades after a signal has been received. Binomo is optimally suited for the actual trading and it supports the 5-minute expiration period required for this system.
Preparing to trade on the strategy – step by step:
- Open the Binomo (site) trading terminal and choose the best possible asset – one with the highest percentage of return. Any currency pairs are suitable, but not the crypto index (CRYPTO IDX). Set the chart interval to 1 minute.
- In the next browser tab, open the live chart on TradingView (site). Choose the same asset and set the same time frame for the candlestick chart.
- We add the two indicators by searching for them by name: «AK MACD BB INDICATOR» and «Three Moving Averages».
- We configure the Three Moving Averages, halving the standard period – see the picture below. The «Length» parameter should be equal to 25, «Length2» is 50, and «Length3» is 100. This will increase the tool’s sensitivity and enable it for use on the minute time frame.
For convenience, it is recommended that you increase the standard thickness of the red and green curves and leave the blue line unchanged. For this strategy, we only need these two curves, so we can make them stand out visually.
After entering the search query, a list of options will appear in the Add Indicators window. Select «AK MACD BB V 1.00» and Three Moving Average from user [AdventTrading]. It should be at the end of the indicator name.
Trading signals on the strategy
The main indicator is TEMA, made up of three curved lines. When they intersect, you should enter the market in the corresponding direction of price movement. But before that you need to get confirmation from a second instrument – the AK MACD BB. If it confirms the price reversal, then you can buy a contract on an increase or a decrease.
- The signal for an increase – the red line crosses the green and begins to build under it. Red MACD points descend below the band with a blue fill, exiting its lower boundary.
- The signal for a decrease – the green MACD points exit the upper boundary of the price channel with a blue fill, and the red TEMA curve rises above the green line.
A positive sign is a discrepancy between the Moving Average right before the intersection. It is a negative sign if the curves go for a long time, almost merging into one line. Trading in a similar time interval is not recommended.
The expiration for trading contracts for this strategy should be about 5 minutes +\- 1 candle. This spread doesn’t really play a significant role. On Binomo, the actual duration of the trade depends on the moment at which it is opened. When trading on this or that strategy, you should always follow the rules of money management to limit your financial risks.