You may think I have lost my mind suggesting that moving average crossovers are not profitable because my entire 4 hour trading strategy (see right for more details) is based on moving averages. However please hear me out. The point I want to make is that trading moving average crossovers in isolation is not profitable.

There was a long academic study done a while back that did extensive tests on moving average crossovers. They concluded that you simply cannot make profits in the long run by trading these crossovers, regardless of what time frame you use or which instrument you trade.

I'm broadly in agreement with those findings (although I still think that you could be successful trading them on the weekly and monthly charts). However if you are a regular reader of this blog and read my weekly trading updates every week, you will know that I use my main 4 hour trading strategy every week and it nearly always produces a profit. So why is this?

Well there are four reasons and they are as follows:

1. I never trade these crossovers in isolation. I always use the Smoothed Repulse indicator to confirm the best set-ups. I want it to be crossing above the 0 line for an upward EMA crossover and below 0 for a downward EMA crossover.

2. I always trade in the same direction as the long term trend. So if the pair is in an upward trend on the daily chart, then I will only trade upward EMA crossovers on the 4 hour chart, for instance.

3. I do not trade every single crossover that occurs on every currency pair that I follow. If the crossover bar is too large or if it occurs at the wrong time of the day, then I may well leave it alone. Similarly I may also turn down a trade if it simply doesn't feel right, and will nearly always ignore any crossovers that take place on a Friday.

4. I like to think I know the GBP/USD and EUR/USD pairs inside out, having watched them every day for many years. Therefore I will always be more confident about certain crossovers that occur on these two pairs rather than those that crop up on the EUR/GBP or USD/JPY pairs for example.

So the point is that although trading moving average crossovers can give you some excellent trading opportunities, you should not trade them in isolation because you are unlikely to make money in the long run. You need to tilt the odds in your favour by filtering out the various set-ups and only trading those that have the highest probability of success, as I have hopefully demonstrated above.

I realized this morning that I failed to mention the Smoothed Repulse indicator when explaining my 4 hour strategy (which you can get free access to when you fill in the form above). However I have now added this additional information, and have also included a link to this page to show you how I find the very best set-ups.