Yes, a lot of Forex trading tools are quite “sexy”,
however this one is really
simple, yet surprisingly powerful. S.E.X., as I lik
e to call it, stands for
“
S
imple /
E
xponential crosses (
X
)”.
A lot of traders use “Simple Moving Averages” (SMA fo
r short) and/or
“Exponential Moving Averages” (EMA for short) as pa
rt of their trading
toolbox, however here I’ll show you some adaptation
s I’ve come up with
using these basic indicators. Chances are that eve
n if you are an experienced
trader you haven’t used this or a similar technique
, and will probably be rather
impressed by the power of it.
A lot of traders are familiar with the concept of m
oving average crossovers,
but like I said before the S.E.X. technique adaptati
on of MA crossovers goes a
little bit further than most people have ever consi
dered, as I’ll explain.
It is common to have two SMAs or EMAs of different p
eriods (i.e. a 10 period
and a 20 period) and watch as they cross over each
other. As the shorter
period crosses over the longer period it shows the
direction that the market is
trending in. If the shorter period (i.e. 10) is ab
ove the longer period (i.e. 20)
then it is because the market has been moving up.
If the shorter period is
below the longer one then it is because the market
has been moving
down. Again, this technique is commonly used by tr
aders, and most traders
know of it’s limitation – the limitation is that MA
crossovers are a “lagging
indicator”. Lagging means that it shows the direct
ion the market is moving in
AFTER it has started to move in that direction. Thu
s MA crossovers aren’t
some kind of psychic predictive tool, however it st
ill does serve the purpose to
help you spot when the market changes direction to
be able to respond
accordingly.
Let us now begin to explore how the S.E.X. lines tec
hnique works. You’ll
soon see how it resembles yet differs from standard
MA crossover
techniques. We’ll start by looking at it’s simples
t aspects and then progress to
more detailed variations.
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