Now that we understand how to enter the market with a Buy order using a simple trading strategy let’s explore a Sell strategy.
Since we are familiar with the Moving Average indicator, it makes sense to use it once more. Right?
Of course, remember that a moving average is a trend-following indicator and in the absence of a trend or the presence of a range the use of the moving average indicator is not the best choice.
I hope this is clear by now.

So, let’s start building our simple trading strategy.
First, we need an “Entry” into the market.
Of course, this time, it will be a Sell entry.
And it goes without saying that our Sell entry will be triggered in a downtrend.
Law of gravity?

A downtrend is more likely to continue to decline lower and lower than reverse.
Now, what happens in the unfortunate event that the market reverses before we book any profits?
Simple. We lose money.
This does not sound very good now, does it?
Well, this is why you should always place a protective stop loss to avoid big losses.
Last but not least, we need to define the “take profit levels”.

An easy way to go about is a 1:2 ratio.
So, first things first.
What timeframe are we going to use?
The answer is simple.
Your preferred timeframe!
Next, how are we going to identify the trend?
With the help of the 100-period moving average!

The Sell entry will be determined by the 50-period moving average.
More precisely, we look for an uptrend as defined by at least two higher tops and two higher bottoms.
A tip here is that the prices will be above both moving averages, and additionally, both moving averages will be moving in parallel without crossing each other.

Now, we look for prices to break through below the moving average.
Then, wait for the correction to the 50-period moving average.
The moving averages have just crossed!
This is a good opportunity to sell when the price falls below the current bottom below the moving average.
Remember! Stop-loss is at the last top!
And, of course, taking profit is up to you.
So your 2 choices in this case are:

  • Either close the trade when 1:2 or 1:3 risk to reward ratio or
  • Close the trade when it closes above the 50-period moving average.

Now you have a strategy! Happy trading!