S.E.X. Variation 2

This is where the value of using S.E.X. starts. It’s power is when you use and combine multiple S.E.X. lines. Here is what I do and my justifications for the periods selected. Pull up a chart (of whatever your favorite currency pair is) and set it to show you daily candles (one candle = one day). On this chart you will have 6 MA

lines (3 SMA and 3 EMA), which are 3 pairs of S.E.X. lines. Set one pair for 5, the second pair at 20, and the third pair for 60. Ok, why these periods? Some traders use arbitrary numbers for their MA crossovers, and it works for them, however I like to use these numbers on a daily candle chart for a specific reason. 5 corresponds with a week (since there are really only 5 trading days in a week), 20 is for a month, and 60 for a quarter of the year (3 months). You can of course add even more S.E.X. lines if you want a semi-year, year, or some other kind of period, and you are more than welcome to play around with those as well. I often like to have 10 as it is two weeks or half of a month, and I like working with it, however for demonstration purposes here the charts will begin to look too confusing though you’ll find that this is really useful in between your 5 and 20 as it makes a nice early show. Bring up another chart and duplicate your lines on it, however just replace the 20 with a 10. You’ll soon see how this is useful. In the next section I’ll discuss periods to use when looking at charts other than daily charts. Now that you have all these lines on your chart it can start to look confusing. It is important to change the colors of your lines to make them easy to distinguish from each other. I always like to make my smallest period EMA green (in this example it is the 5 EMA line); green because it is what I consider to be the “money line”. The green money line is the one that most closely follows the actual price movements, and when it crosses the other lines on your charts it will show you (to describe it simply) the direction the market is currently moving in. I’d recommend that you also make that line green on your charts, whereas all the other ones don’t really matter what color you make them though I have my own personal preference for color groupings as I’m sure you too will come up with your own preferred color sequences. Here is an example of a section of EUR/USD daily that shows some key features of using S.E.X. lines. 

The above chart shows daily candles of EUR/USD between the dates of 09/02/2004 to 02/15/2005 with the 5, 20, and 60 S.E.X. lines drawn. I have selected this chart snippet because it nicely illustrates a few key points about this technique. Take a good look at what the lines are doing in the chart example above, and look at some live charts on your own before reading the next section. Just be looking you should begin to see some interesting things that these lines are showing you. When you are done studying some live charts come back here to read what I wrote and compare it with your observations.