The 50 Simple Moving Average (SMA) is a trendline formed by plotting the past 50 days closing price for an asset. It can be used on any time frame and is particularly useful for scalp traders. Enjoy this session with Igor!
TIMESTAMPS
00:01 – INTRO
00:38 – UTILITY
> The Simple Moving Average (SMA) is a trendline formed by plotting over time the average of the past 50 days’ closing price for an asset.
> It can indicate changing price trends and is used by traders to time the placing and executing of orders.
> Treat the SMA as support and resistance and use it to confirm trade invalidations, such as a close below or above.
> You must always use the 50 SMA as a guide as it won’t always be clear in a trending market.
The cons of using a Simple Moving Average:
> The con of using a simple moving average is that it is a lagging indicator, and this means that price moves first, then the SMA prints a new data point.
> It will tell us traders where the asset came from, thus building that moving average, but will not confirm future prices.
The pros of using a Simple Moving Average:
> The pro of using a simple moving average is that it helps us traders identify the direction change of momentum in markets, therefore you can trade with the trend until the momentum shifts.
> It also helps you determine ins or outs from long and short trades.
> For this strategy, you will want to see a momentum change, and then you can enter on the first pull back to the 50 SMA.
> You can choose to flatten the trade upon hitting your desired take profit or stay in the trade and monitor for a trend change or continuation.
> On the ES you typically get over 10 ticks “average” from the first touch of the 50 SMA.
03:48 – IMPLEMENTATION
🔎 03:51 Example 1: Selling
Note: the 50 SMA rolling over followed by a trend change in momentum.
🔎 07:15 Example 2: Buying
Note: 10 candle closes above the 50 SMA (notice the curling up) followed by a change in momentum and an impulsive move up.
10:22 – TIPS & TRICKS
★ The 50 SMA can be used on any time frame, for scalpers the 1-minute is TF great, for those who like taking more trades, try the ES on TR 3/1.
★ When unclear, hide the price and just leave on the 50 SMA, then check the directional momentum.
★ You want to be in the direction the market is going for a better success rate.
★ Don’t fight the trend, if the moving average is up, you want to be a buyer, inversely if the moving average is down you want to be a seller.
★ Don’t forget to apply risk management to all trades using the 50 SMA Strategy.
★ For confidence, backtest and build statistics on the first touch of the 50 SMA after a break and clear trend direction.
12:32 – FINAL THOUGHTS