Combining How Forex Rebates Work premiumrebateforexs gives you a better underst bestforexrebateratesing of price movements than just looking at the original cashback forex As mentioned in the previous lesson, price crossovers on moving averages are a valid trading rule, but they can lead to serious double losses You can get better buy and sell signals by crossing two moving averages by crossing two moving averages instead of a price crossover on a moving average. A classic example cashbackforexreview HowForexRebatesWork when the 10-day moving average crosses the 20-day moving average, you should buy and when the 20-day moving average crosses the 10-day moving average, you should sell. Some technical analyses refer to such crossovers as "breakouts" The following example chart shows the blue 10-day moving average against the red 20-day moving average There are five crossovers in this chart, and one of them is clearly about to occur at There is an interesting range in the center of the chart at the end of the price data; the blue 10-day moving average rises near the 20-day moving average, but fails to actually cross that line Every trade on this chart is profitable, but note that most of the charts during this period faced at least one or two double losses on the 10-day moving average and 20-day moving average crossover chart example has a We cannot verify the historical data on which this knowledge is based, but some traders rely on it and always sell currencies short when the price crosses the 10-day moving average and the profit target is a few pips away from the 20-day moving average. Some traders try to game the market with strange combinations such as 7 and 13, 15 and 30. Please realize that there is no magic combination of any currency or all Forex prices. The combination of a 10-day moving average and a 20-day moving average is a classic combination on a daily chart. The chart period you use may be daily, 4 hours and 1 hour. On an hourly chart, the 20-day period is close to a full 24-hour period for some reason, and price breaks of this line usually have real value, not only because you understand that in a trading system containing two moving averages, price will drag the 10-day moving average down (unless the low position Sometimes the price will be knocked back just a point or two away from the 20-day moving average. The important thing is that you get a fully acceptable trading system with a system of two moving averages that works for any time period. Once again we see the blue 10-day SMA crossing the 20-day SMA on the left side of the chart, followed by a downside crossover and then resumption of the uptrend. It should be noted that the price did not cross the 10-day SMA until 4 sessions after the highest point, and that it took another 4 sessions before the 10-day moving average crossed the 20-day moving average, or a 16-hour delay in getting a confirmed sell signal for a 2-hour period Example of a 10-day moving average and 20-day moving average crossover chart on a cycle After experiencing double losses, the biggest problem with using the moving average crossover trading system is - its lagging nature In fact, almost all technical indicators have some lagging nature, but moving averages have the most severe lagging moving average ribbons Why not put a series of moving averages all on the same chart? This idea was developed by Daryl Guppy and is known as the moving average ribbon The chart below illustrates this idea There are 12 moving averages on the chart, each collating a fixed number of points above or below the 20-day moving average The ribbon is made up of 12 moving average indicators When we look at the moving average ribbon, we are more interested in the spacing between the different moving averages than the crossover points When the moving averages tend to converge and move closer to each other, traders are almost on the way to a consensus When the moving averages are parallel, a unanimous consensus has been reached But when the moving averages diverge and tend to diverge, traders views on the currency diverge - and one of them will be correct By looking at the chart above As you can see, there is a lot of daylight between the moving averages on the left side of the chart and the price has fallen sharply, but the ribbon lines are still scattered - because traders are not in agreement. If you have opened a position and are very risk averse, then the narrowest point is the confidence building point, indicating that it would be wise to buy here and later, this decision will be confirmed by a new high price for the moving average ribbon is an interesting idea that is perhaps better suited as a sentiment indicator rather than a trading guide Did you know? In the stock market, chart analysts make the argument that the 100-day moving average (slightly more than a quarter) and the 200-day moving average (almost a years worth of data, with a business year that actually has about 240 days) are important numbers If you backtest any major stock index (such as the S&P 500), you will find that these magic numbers dont actually matter, but thats not The point - many traders believe they are important and will follow them. When the 100-day moving average crosses the 200-day moving average, it is called a "golden cross" and can be used as a buy signal, and when the 100-day moving average crosses the 200-day moving average, it is called a "dead cross" and can be used as a sell signal. Both statements are fallacies in the stock and foreign exchange markets; we mean that there is no empirical evidence from historical data that these crossovers correlate with important turning points, but it is important to remember that not everyone thinks this is a fallacy