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š Prop Traders Use this SMA to Stay Ahead of the Curve
What makes the 100-day simple moving average (SMA) so special?
š PASS THE PROP TRADING TIPS
š Prop Traders Use this SMA to Stay Ahead of the Curve
What makes the 100-day simple moving average (SMA) so special? š Why do traders keep coming back to it, day after day, chart after chart? The answer lies in its unique ability to draw a clear line between confidence and chaosābetween trending markets and turbulent ones. When prices stay above the 100-day SMA, itās a signal that the bulls are firmly in control, steadily building uptrends and buying every dip. šš¹ But when prices slip below that level, the terrain gets rough. Downtrends emerge, volatility spikes, and the market can quickly spiral into panic. šā” This average isnāt just a technical indicatorāitās a reflection of where sentiment shifts and trends are born.
In the world of prop trading, the 100-day SMA takes on even greater significance. Prop traders often operate with firm risk constraints and are acutely aware of drawdown limits. Above the 100-day SMA, the market tends to move in more predictable, orderly uptrends. This allows prop traders to set wider stops and aim for broader profit targets without the constant fear of sudden reversals. With the trend in their favor, they can relax into trades and let the market naturally carry them to their targets. Itās not about being carelessāitās about recognizing when the conditions allow for a more forgiving approach. š ļøš Some prop firms, such as Axi Select, have fewer trading restrictions and no strict consistency rules. This gives traders greater freedom to adapt their strategies without facing the risk of breaching the rules, providing a more flexible environment that many traders appreciate. š
Below the 100-day SMA, however, things change dramatically. Here, the prop trader must adapt quickly because swift, sharp reversals are more likely to occur. The lower the price sinks below the SMA, the choppier the market becomes. In these situations, tighter risk management is crucial. Exiting part of a position early, rather than waiting for the trade to fully develop, can be a prudent move. By reducing exposure, traders protect their capital from the higher drawdown risks that come with trading in turbulent conditions. For a prop trader, this isnāt just good practiceāitās essential for maintaining their position within the firmās rules and safeguarding their trading account. š¼š
In this EURUSD chart, you can also see how the average true range (ATR)āwhich measures the average trading rangeātends to be higher during downtrends compared to uptrends. š When the market is trading below the 100-day SMA, the ATR typically rises, indicating greater volatility and more erratic price movements. This increased volatility underscores why traders must be more vigilant and flexible when navigating markets below the 100-day SMA.

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