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S.E.X. LINES
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Yes, a lot of Forex trading tools are quite “sexy”, however this one is really
simple, yet surprisingly powerful. S.E.X., as I like to call it, stands for
“Simple / Exponential crosses (X)”.
A lot of traders use “Simple Moving Averages” (SMA for short) and/or
“Exponential Moving Averages” (EMA for short) as part of their trading
toolbox, however here I’ll show you some adaptations I’ve come up with
using these basic indicators. Chances are that even 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 moving average crossovers,
but like I said before the S.E.X. technique adaptation of MA crossovers goes a
little bit further than most people have ever considered, as I’ll explain.
It is common to have two SMAs or EMAs of different periods (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 above 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 traders, and most traders
know of it’s limitation – the limitation is that MA crossovers are a “lagging
indicator”. Lagging means that it shows the direction the market is moving in
AFTER it has started to move in that direction. Thus MA crossovers aren’t
some kind of psychic predictive tool, however it still 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 technique works. You’ll
soon see how it resembles yet differs from standard MA crossover
techniques. We’ll start by looking at it’s simplest aspects and then progress to
more detailed variations.
S.E.X. Variation 1

Simply put, the example from above shows this variation of the
“Simple/Exponential Cross”. If you are used to using MA crossovers by
combining MAs of different (but close) values then you could simply switch
to using a couple of S/EMAs of the same value. It will yield similar results
and you’ll find that they are nicely sensitive.
The smaller the period the more sensitive will be the crossovers thus more
quickly showing small changes in the trend (i.e. fibonacci swings & minor
retracements), and the larger the period the less sensitive (to market bouncing
fluctuations) will be the crossover thus showing you the prevailing trend.
Traditional MA crossovers, as well as the basic S.E.X. technique is usefull to
the trader to show trends in the market and to signal changes in market
direction. Though some traders employ trading strategies that they enter/exit
the market whenever their lines cross (I’ve met some traders that basically use
just this technique profitably) I wouldn’t recommend it. The primary purpose
of watching MA crossovers, and of course S.E.X. crosses is to help you to
make trading decisions in conjunction with other technical analysis
tools. THEY ARE NOT MEANT TO BE USED ALONE.
What periods should you use? Feel free to play around & test using whatever
period you want, however the periods I use & why are explained below.
One more note here – you may notice that a pair of S.E.X. lines has similar
properties to MACD (Moving Average Convergence Divergence). Though
they share some commonalities they still behave a bit differently, and more
importantly because S.E.X. lines are superimposed over your charts it helps to
more clearly see, visually, certain indications that wouldn’t be as apparent by
just using MACD. Loosely defined, S.E.X. lines combine some of the
elements of MACD and MA crossovers, yet they have their own properties
altogether.forex sato