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A Simple “Sell” Strategy
So, we had a look into a “buy” strategy, but what if we wanna sell instead?
Here’s a simple sell strategy you can use!
1. An “Entry” into the market (in this case, a sell entry)
First, we need an “Entry” into the market, and since this time we’re going for a sell entry, it will be triggered in a downtrend.
Why? Because a downtrend is more likely to continue to decline lower and lower than reverse.
Now, what happens in the unfortunate event that the market reverses before we book any profits?
Unfortunately, we lose money, and this is why you should always place a protective stop loss to avoid big losses.
2. Define the “take profit levels”
Moving on, we need to define the “take profit levels”. An easy way to go about is a 1:2 ratio, and you can use your preferred timeframe for this. You can then identify the trend with the help of the 100-period moving average.
Now, the sell entry will be determined by the 50-period moving average, and, more precisely, we’re looking for an uptrend as defined by at least two higher tops and two higher bottoms.
A tip here is that the prices will be above both moving averages and additionally both moving averages will be moving in parallel without crossing each other.
Now, we look for a price to break through below the moving averages, and then, wait for the correction to the 50-period moving average.
Once the moving averages have crossed, this is a good opportunity to sell, as the price falls below the current bottom, below the moving average.
3. Stop-loss & Taking Profit
In this case, a stop-loss should be at the last top, and of course, taking profit is solely up to you.
So your 2 choices in this case are:
- Either close the trade when 1:2 or 1:3 risk to reward ratio or
- Close the trade when the price closes above the 50-period moving average.
Now you have a strategy! Happy trading!
