Hi, I have just recently made a strategy based on MA crossovers. I have come across an instance where I got a signal to short the GBPUSD pair whilst also getting a signal to long the AUDUSD pair.
Do I still take these signals or revise my trading strategy?
Thanks
Keshav
By asking the question you are in fact revising your strategy, otherwise you would simply take the two trades and say nothing here. So you are more than half convinced that selling one and buying the other is unwise and I would agree.
Do not blindly accept trade entry signals of any kind, especially those that arise from an indicator. MA’s are good indicators to show you if a trend is in place, which direction it is trending and how strong it is compared to another trend. Crossovers between 2 MA’s are NOT good entry signals.
Before taking a trend-following trade such as buying an AUD pair, I always look to see if the other AUD-based pairs are also bullish: right now on the daily chart the 7 major AUD pairs are mostly bullish (6:1). The 7 GBP are split down the middle, 3:4, while most of the USD-based pairs are also bullish, 5:2. Buying AUD/USD while both AUD and USD are strong seems a hard way to make a profit. Selling GBP/USD seems easier but GBP is not convincingly bearish, while any Brexit deal news will send it up very fast, if not permanently.
The EUR pairs are much more bearish than the GBP’s.
I meant to type “unwise” - I have edited this now.