Simple 5M FOREX Trade Strategy

Written by philip cooper
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Simple 5M FOREX Trade Strategy
Simple strategies tend to work better than complex ones. (strategy - chess image by rlat from Fotolia.com)

In FOREX terminology 5M stands for five minutes. A simple five-minute FOREX (Foreign Exchange) strategy is based upon a price chart which shows the high and low prices of a currency at five-minute intervals.

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Exponential Moving Average

Idenfity two exponential moving average (EMA) lines to set up the strategy. An exponential moving average is an indicator which calculates the average closing price of a currency over predefined periods of time. If the trader is using a five-minute chart and the EMA is set up for the past 10 five-minute periods, the EMA line will track the average of the past 10 closing prices. For a simple FOREX strategy we use two EMA lines, one set at 10 periods and the other at five periods. When the EMA "5 line" crosses above the EMA "10 line" it is signalling a buy. If it crosses below the EMA 10 line it signals a sell.

RSI

Use the RSI (Relative Strength Index) indicator to measure the relative strength of a trend. The indicator is graded from zero to 100. If the RSI line is above 50 it signals a buy entry. An indicator below 50 indicates a sell entry.

Strategy For Indicators

Ensure a successful trading strategy by using the EMA and RSI indicators in conjunction with each other. If the EMA 5 crosses above the EMA 10 and at the same time the RSI is above 50, it's a clear buy signal. If the EMA 5 crosses below the EMA 10 and the RSI is below 50, it's a clear sell signal.

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