The RecursiveMA identifies the direction of the trend by plotting two moving averages. This guide will talk about how the indicator works and how you can apply it as a strategy.
What is the RecursiveMA indicator?
The RecursiveMA is a modified version of the traditional moving averages. Instead of applying for a single MA, it applies for two MAs. These MAs have different periods; one is shorter and longer.
We have trading signals when we have a crossover of these moving averages.
RecursiveMA Indicator Strategy
In the traditional MA, there is a single moving average, and whenever the price dips below or goes above it we can enter the trade.
To trade with the RecursiveMA indicator, all you have to do is look for crossovers. The crossover strategy is one of the most popular in the forex market, and even if you are a beginner, you can apply it with some practice.
When the shorter MA (yellow) moves below, the longer (pink) you have a potential long entry point. This is known as a golden cross. Conversely, if the longer MA moves below, the shorter one, you can take short positions. It’s called a death cross.
The good thing about RecursiveMA is it works on all timeframes. If you want to apply the indicator for short-term strategies, a good approach is to look for an overall trend or crossovers over a longer timeframe. You can return to the lower timeframe and look for a potential entry point.
It’s important to remember that, like the traditional MA, RecursiveMA is a lagging indicator based on past prices. So, applying any other indicator, like the RSI, for further signal confirmation is better.
Buy Signal
- The shorter MA must cross above the longer one.
- Wait for the crossover, and then enter on the next candle.
- You could place a stop-loss at the recent low.
- You could set take-profit at the previous high or exit the trade when the shorter MA dips below the longer one.
Sell Signal
- The longer MA must cross above the shorter one.
- Wait for the crossover, and then enter on the next candle.
- You could place a stop-loss at the recent high.
- You could set take-profit at the previous low or exit the trade when the shorter MA goes above the longer one.
RecursiveMA Indicator Pros & Cons
RecursiveMA is good for some strategies but lags on others. Let’s see what its pros and cons are.
Pros
- The RecursiveMA buy signal is simple to understand.
- The MA crossover is one of the best strategies in the forex market.
- It presents clear entry and exit points.
Cons
- The indicator is a lagging indicator, which means it tells about the past price rather than the current price action.
- The indicator may produce false signals in a shorter timeframe.
Conclusion
The RecursiveMA is a simple MT4 indicator that applies moving averages and shows the crossovers. Whenever a crossover occurs, you can take positions. However, you may want to confirm all signals with additional market analysis. I would be looking at price action including support and resistance levels along with any bullish or bearish candlestick patterns. As with any forex strategy, you should have excellent money management so that one bad trade does not cancel out a consecutive run of winners. You can always practice trading on a forex demo account to begin with to improve your trading skills and build up your confidence. Most forex brokers provide a free demo account, including IC Markets. They are my top choice for both manual and automated forex trading systems. This is because they have tight spreads, quick execution speeds, low commission fees and excellent 24/7 support.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
