Ема 55 Форекс

Gold&#;s pull back from picks up momentum today. The break of minor support should confirm short term topping, after initial rejection by high. Deeper decline is now expected as long as minor resistance holds, towards 55 day EMA (now at ).

The pull back from could either be a correction to rise from only. Or it could be the third led of the corrective pattern from high. Strong rebound from 55 day EMA will favor the former case, and bring upside breakout through sooner. However, sustained break of 55 day EMA will favor the latter case, and bring deeper fall back to support.

While the traditional moving average cross over method offers a fairly decent trade set up, in times of ranging markets, the crossovers of the moving averages can get choppy resulting in quite a few losing trades. Instead of buying and selling on bullish and bearish crossovers of the moving averages, trading the retracements after the crossover can offer a fairly reliable trading strategy with a minimum of risk reward.

In this trading strategy, EMA Crossover with Fibs, the basic chart set up is very simple. The indicators used are:

• 20 Period EMA applied to closing prices
• 55 Period EMA applied to closing prices

The indicators are applied to the H4 charts.

EMA Crossover strategy – Basic guidelines

The 20, 55 EMA crossover strategy works on the following principles.

• When the shorter period moving average cuts below the longer term moving average, the bias is to the downside. Similarly, when the shorter period moving average cuts above the longer term moving average, the bias is to the upside.
• By using the Fibonacci retracement tool, we then measure the swing pivots high and low
• Trades are entered at the % retracement with stops at % retracement. For targets, we use the % as the first target followed by % for the second target
• The Fib levels shows us how the targets are always higher than the risks for the trade

The chart below shows a typical set up, which is explained in detail later in this article.

In the above chart, we measure the swing high and low, prior to and after the bullish crossover. Trade is entered when price retraces to the % Fib level with stops coming below at % Fib level, targeting % and %.

This trading strategy requires traders to be alert, especially after the EMA’s crossover as the retracement to % is very quick in most cases with price usually making a long dip to the % Fib level before it starts to move in the direction of the trend.

EMA Crossover Strategy – Buy/Long Positions

• 20 EMA must cross over the 55 EMA on the H4 charts
• Switch the chart to a line chart and using the Fib tool, measure the most recent low swing point prior to the bullish crossover to the most recent swing high above the EMA crossover
• Ensure that the % retracement is close to the 55 EMA. If the % retracement level is far below the longer term EMA, then wait for price action to give further clues
• Stops are placed at % retracement targeting % and % Fib levels. Ensure that by the time price reaches % Fib level, your trades are moved to break even.

The chart below gives an example of a buy set up using this strategy. We make use of the line chart to illustrate how to use the Fibs to measure the swing high and low points that are created.

1. We identify a bullish EMA crossover as the 20 period EMA cuts above the 55 period longer term EMA
2. Using the line chart, we then identify the swing low, just before the crossover and the swing high at or after the crossover. We then use the Fib tool to measure this distance
3. A buy order is placed at % Fib retracement as there is a strong confluence with the Fib level and the 55 period EMA
4. Stops are placed at or below % Fib level (mind the spread)
5. We book profits at % and % Fib levels

EMA Crossover Strategy – Sell/Short Positions

• The 20 EMA must cross below the 55 EMA on the H4 charts
• Switching to line charts, we use the Fib tool to measure the first swing high and the last swing low prior to and after the bearish EMA crossover
• Short position is entered at % Fib level with stops at or above %, targeting % and %

The following chart shows an example of a short position

1. The EMA 20 cuts below EMA 55 triggering a bearish crossover of the moving averages
2. Measure the swing high prior to the bearish crossover and the swing low after the bearish crossover
3. Look for confluence of the % Fib level with the 55 EMA and enter a sell order
4. Place stops at or above % Fib level, targeting % and %

20, 55 EMA Crossover Retracement Strategy

This strategy is one of the simplest and offers a very good risk/reward ratio for all trades. The most ideal trades are those where the % Fib level shows confluence with the 55EMA, thus increasing the odds. Unlike trading based off the moving average crossovers, the retracement method allows us to enter only after a trend is established. Furthermore, the defined risks ensure that all trades have a good RR, thus making this is a very robust trading strategy to follow.

By using only the H4 charts, this trading strategy is suited for traders where the average trade holding time can be from a few days to a week or two at the max.

What Is an Exponential Moving Average (EMA)?

An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average. An exponentially weighted moving average reacts more significantly to recent price changes than a simple moving average simple moving average (SMA), which applies an equal weight to all observations in the period.

Formula for Exponential Moving Average (EMA)

​EMAToday​=​(ValueToday​∗(1+DaysSmoothing​))​where:​

While there are many possible choices for the smoothing factor, the most common choice is:

That gives the most recent observation more weight. If the smoothing factor is increased, more recent observations have more influence on the EMA.

Calculating the EMA

Calculating the EMA requires one more observation than the SMA. Suppose that you want to use 20 days as the number of observations for the EMA. Then, you must wait until the 20th day to obtain the SMA. On the 21st day, you can then use the SMA from the previous day as the first EMA for yesterday.

The calculation for the SMA is straightforward. It is simply the sum of the stock's closing prices during a time period, divided by the number of observations for that period. For example, a day SMA is just the sum of the closing prices for the past 20 trading days, divided by

Next, you must calculate the multiplier for smoothing (weighting) the EMA, which typically follows the formula: [2 ÷ (number of observations + 1)]. For a day moving average, the multiplier would be [2/(20+1)]=

Finally, the following formula is used to calculate the current EMA:

• EMA = Closing price x multiplier + EMA (previous day) x (1-multiplier)

The EMA gives a higher weight to recent prices, while the SMA assigns equal weight to all values. The weighting given to the most recent price is greater for a shorter-period EMA than for a longer-period EMA. For example, an % multiplier is applied to the most recent price data for a period EMA, while the weight is only % for a period EMA.

There are also slight variations of the EMA arrived at by using the open, high, low, or median price instead of using the closing price.

What Does the EMA Tell You?

The and day exponential moving averages (EMAs) are often the most quoted and analyzed short-term averages. The and day are used to create indicators like the moving average convergence divergence (MACD) and the percentage price oscillator (PPO). In general, the and day EMAs are used as indicators for long-term trends. When a stock price crosses its day moving average, it is a technical signal that a reversal has occurred.

Traders who employ technical analysis find moving averages very useful and insightful when applied correctly. However, they also realize that these signals can create havoc when used improperly or misinterpreted. All the moving averages commonly used in technical analysis are lagging indicators.

Consequently, the conclusions drawn from applying a moving average to a particular market chart should be to confirm a market move or indicate its strength. The optimal time to enter the market often passes before a moving average shows that the trend has changed.

An EMA does serve to alleviate the negative impact of lags to some extent. Because the EMA calculation places more weight on the latest data, it “hugs” the price action a bit more tightly and reacts more quickly. This is desirable when an EMA is used to derive a trading entry signal.

Like all moving average indicators, EMAs are much better suited for trending markets. When the market is in a strong and sustained uptrend, the EMA indicator line will also show an uptrend and vice-versa for a downtrend. A vigilant trader will pay attention to both the direction of the EMA line and the relation of the rate of change from one bar to the next. For example, suppose the price action of a strong uptrend begins to flatten and reverse. From an opportunity cost point of view, it might be time to switch to a more bullish investment.

Examples of How to Use the EMA

EMAs are commonly used in conjunction with other indicators to confirm significant market moves and to gauge their validity. For traders who trade intraday and fast-moving markets, the EMA is more applicable. Quite often, traders use EMAs to determine a trading bias. If an EMA on a daily chart shows a strong upward trend, an intraday trader’s strategy may be to trade only on the long side.

The Difference Between EMA and SMA

The major difference between an EMA and an SMA is the sensitivity each one shows to changes in the data used in its calculation.

More specifically, the EMA gives higher weights to recent prices, while the SMA assigns equal weights to all values. The two averages are similar because they are interpreted in the same manner and are both commonly used by technical traders to smooth out price fluctuations.

Since EMAs place a higher weighting on recent data than on older data, they are more responsive to the latest price changes than SMAs. That makes the results from EMAs more timely and explains why they are preferred by many traders.

Limitations of the EMA

It is unclear whether or not more emphasis should be placed on the most recent days in the time period. Many traders believe that new data better reflects the current trend of the security. At the same time, others feel that overweighting recent dates creates a bias that leads to more false alarms.

Similarly, the EMA relies wholly on historical data. Many economists believe that markets are efficient, which means that current market prices already reflect all available information. If markets are indeed efficient, using historical data should tell us nothing about the future direction of asset prices.

Super High Accuracy Forex BUY SELL Trading Signals &#; Forex Daily Weekly Open Trading Strategy With EMA 55 Channel and BUY SELL Signals. Daily and Weeky Open trading system With EMA 55 is a trend following strategy based on the Moving Average and high accuracy trend filter indicators.

I used a WEEKLY time frame to determine the trend, a DAILY time frame to get an entry zone, a 30 minutes charts to get a strong move, and M15 chart to judge the quality of the entry point.

High timeframe trading is more profitable for a few reasons.

• The moves are larger &#; a breakout upwards will be hundreds of pips and not a few dozen which smaller timeframes experience.
• A trader has more time to examine the trade and spends days planning. This allows ample opportunity to fully understand the entry and exit and formulate an exact course of action.

Forex Daily Weekly Open Strategy With EMA 55 Channel Trading Rules

Daily and Weeky Open trading system is a trend following strategy based on the EMA 55 Channel and BUY SELL Signals. I used a weekly time frame to determine the trend, a daily time frame to get an entry zone,

• Best TREND Time Frame :  Weekly and Daily
• Best Open Position Time Frame : M30 and H1
• Recommended Currency Pairs : EUR/USD, USD/JPY, AUD/USD, GBP/USD, GBP/JPY, EUR/JPY, AUD/NZ, USD/NZ.

Metatrader Trading Indicators

• Daily Weekly Open;
• 55 channel EMA;
• Exponential moving average (55, high) EMA;
• Exponential moving average (55, low) EMA;
• Signal Trend;
• SEFC 10,
• THV 3 Candle clock,
• CPI ();
• Ferrux FX multi info;
• Ichi EMA Shaff confirmation;
• FX sniper LSMA;
• Heiken Ashi indicator;
• Candle time spread;
• non lag dor alert indicator;
• QQE ADV indicator;
• Booster power indicator;
• THV Trix Called;
• MTF Trix Trend;

General Rules of Forex Daily Weekly Open Strategy With EMA 55 Channel Trading System:

• Trades only in the direction of the trend.
• Buy when the price is above the daily and weekly open.
• Sell when the price is below the daily and weekly open.
• The Trend is determined by channel 55 ema = green line buy, sell red line.
• at least three indicators should be consistent with the trend.

BUY Rules

• Buy when the price is above the daily and weekly open
• SELL Signal Alert ON
• Heiken Ashi blue candles
• Price above channel 55 ema
• NonLagDot(30) blue bars
• QQE ADV upward above 50  level (blue line above red line)
• Blue line booster power upward above redline and above 0 level
• THV Trix lines blue color and above 0 level
• Signal Trend green color bars

SELL Rules

• Sell when the price is below the daily and weekly open
• BUY Signal Alert ON
• Heiken Ashi red candles
• Price below channel 55 ema
• NonLagDot(30) red bars
• QQE ADV downward below 50  level (blue line below red line)
• Blue line booster power downward below redline and below 0 level
• THV Trix lines red color and below 0 level
• Signal Trend red color bars

EXIT Rules

• Exit position is discretionary.
• Place stop loss on the previous swing.

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I just want to share my little observation about this most lucrative business. It's a factual fact that no matter the strategy you are trading this market will violate it one or many several times that might want to tempt you of leaving the strategy but the still remain that no holy grail any where of which as a matter of fact, what matters in this business is solid money management and high probability winning trade set-up that is stress free. so, below is the strategy which is based on trending Market.

Timeframe: Any but i will recommend 4hour, 1hour and 15mins
Indicator: 55ema
Currency: Any pairs of your choice but i will recommend EURUSD, GBPUSD and USDCHF or you might include commodities.

Trading Rules: Come at any market opening i.e. Asian Session, London/Euro Session and US session.

Check where the price open and measure the distance from opening of the price to the 55ema if the distance is not more than less than 40pips open a trade in the direction of the 55ema and used 40pips stoploss and 40pips take profit in assian session but if London/US session you can used 40pips stoploss and 60pips take price.

The idea behind this trade set-up is that if price is above 55ema we assume its an uptrend and if price is below the 55ema we assume is a downtrend of which the timeframe determine how long the trend is is short, medium or longterm trend when using larger timeframe we assume it's a longterm trend and when using shorter time frame is a short term trend and most important thing is if the shorter timeframe is contradicting the longer timeframe which means you are trading against the longterm trend which is delicate.
I will highly appreciate and welcome modification from guru traders.
Though their is no holy grail in any where but we only need something that has high winning compare to losing one.

my email is :sat2realmentor(at)eunic-brussels.eu,
or call:+ for details or more clarity but hope i have affected some newbies that is reading this strategy one way or the other positively.

Edward Revy,
eunic-brussels.eu
Copyright © Forex Strategies Revealed

Breakout  &#; Strategy that use of just the 45 period EMA and no other indicators. It works on the concept of break out and is very simple. However, only experienced traders are better suited to trade this strategy as break outs can often result in a fake out with price reversing back to its previous trend. This strategy works on both H4 and daily time frames and therefore it is not an intraday strategy.

Strategy Set Up

Recommended Broker >>

Breakout Strategy Rules

Long Set up:

• Price closes above the 55 EMA
• Second candle after the close should also be bullish
• Buy on the third candle
• Set stop loss to a few pips below the 55 EMA
• Take profit will be 60 – 80 pips if using the H4 time frame or – pips if using the daily time frame

Short Set up:

• Price closes below the 55 EMA
• Second candle after the previous close is also bearish
• Sell on the third candle
• Set stop loss to a few pips above 55 EMA
• Take profit would be 60 – 80 pips if using the H4 time frame of – pips when trading on the daily time frames

Strategy Examples

Short Set up

• Price breaks below the 55 EMA
• After two bearish candles, a sell order is placed with a 80 pips in take profit and stops placed just above the 55 EMA
• Trade results in a profit

Long Set up

• Price breaks above the 55 EMA
• After two consecutive bullish candlesticks, a buy order is placed with 80 pips in take profit and stops placed just below the 55 EMA
• Trade results in a profit

Conclusion

The 55EMA breakout strategy is one of the simplest break out trading strategy that works best on H4 or daily charts. However, despite the simplicity, this strategy requires quite some experience in knowing how to identify a break out from a fake out.

Moving averages are without a doubt the most popular trading tools. Moving averages are great if you know how to use them but most traders, however, make some fatal mistakes when it comes to trading with moving averages. In this article, I show you what you need to know when it comes to choosing the type and the length of the perfect moving average and the 3 ways how to use moving averages when making trading decisions.

Step 1: What is the best moving average? EMA or SMA?

At the beginning, all traders ask the same questions, whether they should use the EMA (exponential moving average) or the SMA (simple/smoothed moving average). The differences between the two are usually subtle, but the choice of the moving average can make a big impact on your trading. Here is what you need to know:

#1 The differences between EMA and SMA

There is really only one difference when it comes to EMA vs. SMA and it’s speed. The EMA moves much faster and it changes its direction earlier than the SMA. The EMA gives more weight to the most recent price action which means that when price changes direction, the EMA recognizes this sooner, while the SMA takes longer to turn when price turns.

#2 Pros and cons – EMA vs SMA

There is no better or worse when it comes to EMA vs. SMA. The pros of the EMA are also its cons – let me explain what this means:

The EMA reacts faster when the price is changing direction, but this also means that the EMA is also more vulnerable when it comes to giving wrong signals too early. For example, when price retraces lower during a rally, the EMA will start turning down immediately and it can signal a change in the direction way too early. The SMA moves much slower and it can keep you in trades longer when there are short-lived price movements and erratic behavior. But, of course, this also means that the SMA gets you in trades later than the EMA.

#3 Resume

In the end, it comes down to what you feel comfortable with and what your trading style is (see next points). The EMA gives you more and earlier signals, but it also gives you more false and premature signals. The SMA provides less and later signals, but also less wrong signals during volatile times.

In my trading, I use an SMA because it allows me to stay in trades longer as a swing trader.

Step 2: What is the best period setting?

After choosing the type of your moving average, traders ask themselves which period setting is the right one that gives them the best signals?!

There are two parts to this answer: first, you have to choose whether you are a swing or a day trader. And secondly, you have to be clear about the purpose and why you are using moving averages in the first place. Let’s go about this now:

#2 The self-fulfilling prophecy

More than anything, moving averages “work” because they are a self-fulfilling prophecy, which means that price action respects moving averages because so many traders use them in their own trading. This raises a very important point when trading with indicators:

You have to stick to the most commonly used moving averages to get the best results. Moving averages work when a lot of traders use and act on their signals. Thus, go with the crowd and only use the popular moving averages.

#3 The best moving average periods for day-trading

When you are a short-term day trader, you need a moving average that is fast and reacts to price changes immediately. That’s why it’s usually best for day-traders to stick with EMAs in the first place.

When it comes to the period and the length, there are usually 3 specific moving averages you should think about using:

• 9 or 10 period: Very popular and extremely fast-moving. Often used as a directional filter (more later)
• 21 period: Medium-term and the most accurate moving average. Good when it comes to riding trends
• 50 period: Long-term moving average and best suited for identifying the longer-term direction

#4 The best periods for swing-trading

Swing traders have a very different approach and they typically trade on the higher time frames (4H, Daily +) and also hold trades for longer periods of time. Thus, swing-traders should first choose a SMA and also use higher period moving averages to avoid noise and premature signals. Here are 4 moving averages that are particularly important for swing traders:

• 20 / 21 period: The 21 moving average is my preferred choice when it comes to short-term swing trading. During trends, price respects it so well and it also signals trend shifts.
• 50 period: The 50 moving average is the standard swing-trading moving average and very popular. Most traders use it to ride trends because it’s the ideal compromise between too short and too long term.
• period: There is something about round numbers that attract traders and that definitely holds true when it comes to the moving average. It works very well for support and resistance – especially on the daily and/or weekly time frame
• / period: The same holds true for the moving average. The period moving average is popular on the daily chart since it describes one year of price action (one year has roughly trading days)

Step3: How to use moving averages – 3 usage examples

Now that you know about the differences between the moving averages and how to choose the right period setting, we can take a look at the 3 ways moving averages can be used to help you find trades, ride trends and exit trades in a reliable way.

#1 Trend direction and filter

Market Wizard Marty Schwartz was one of the most successful traders ever and he was a big advocate of moving averages to identify the direction of the trend. Here is what he said about them:

“The 10 day exponential moving average (EMA) is my favorite indicator to determine the major trend. I call this “red light, green light” because it is imperative in trading to remain on the correct side of a moving average to give yourself the best probability of success. When you are trading above the 10 day, you have the green light, the market is in positive mode and you should be thinking buy. Conversely, trading below the average is a red light. The market is in a negative mode and you should be thinking sell.” – Marty Schwartz

Marty Schwartz uses a fast EMA to stay on the right side of the market and to filter out trades in the wrong direction. Just this one tip can already make a huge difference in your trading when you only start trading with the trend in the right direction.

The Golden Cross and the Death Cross

But even as swing traders, you can use moving averages as directional filters. The Golden and Death Cross is a signal that happens when the and period moving average cross and they are mainly used on the daily charts.

In the chart below, I marked the Golden and Death cross entries. Basically, you would enter short when the 50 crosses the and enter long when the 50 crosses above the periods moving average. Although the screenshot only shows a limited amount of time, you can see that the moving average cross-overs can help your analysis and pick the right market direction.

#2 Support and resistance and stop placement

The second thing moving averages can help you with is support and resistance trading and also stop placement. Because of the self-fulfilling prophecy we talked about earlier, you can often see that the popular moving averages work perfectly as support and resistance levels.

Word of caution: Trend vs ranges

Moving averages don’t work in ranging markets. When price ranges back and forth between support and resistance, the moving average is usually somewhere in the middle of that range and price does not respect it that much.

The screenshot below shows a price chart with a 50 and 21 period moving average. You can see that during the range, moving averages completely lose their validity, but as soon as the price starts trending and swinging, they perfectly act as support and resistance again.

#3 Bollinger Bands and the end of a trend

The Bollinger Bands are a technical indicator based on moving averages. In the middle of the Bollinger Bands, you find the 20 periods moving average and the outer Bands measure price volatility.

During ranges, the price fluctuates around the moving average, but the outer Bands are still very important. When price touches the outer Bands during a range, it can often foreshadow the reversal in the opposite direction when it’s followed by a rejection. So, even though moving averages lose their validity during ranges, the Bollinger Bands are a great tool that still allows you to analyze price effectively.

During trends, Bollinger Bands can help you stay in trades. During a strong trend, the price usually pulls away from its moving average, but it moves close to the Outer Band. When price then breaks the moving average again, it can signal a change in direction. Furthermore, whenever you see a violation of the outer Band during a trend, it often foreshadows a retracement – however, it does NOT mean a reversal until the moving average has been broken.

You can see that moving averages are a multi-faceted tool that can be used in a variety of different ways. Once a trader understands the implications of EMA vs SMA, the importance of the self-fulfilling prophecy and how to pick the right period setting, moving averages become an important tool in a trader’s toolbox.

The Forex trading Exponential Moving Average was developed because the simple and weighted moving average indicators failed to predict buy and sell signals properly. By assigning more weight to the most recent price data, the prediction of currency price is made more accurate, and this is the basis of exponential moving average (EMA).

To calculate a regular weighted moving average, a 10 day MA for example, you would take the closing price for the 10th day and multiply it by 10, the 9th day price multiplied by 9, and so on till the 1st day price. This total would be divided by the sum of multipliers - meaning for 10 days - The EMA has helped make Forex trading technical analysis more accurate and flexible.

The exponential moving average is similar, only it is not linear, and it is adjustable by the trader, so he can give more or less weight to the recent prices.

One possibility for learning about the EMA more profoundly is using a forex trading system course, even though most traders usually get the basic idea of the indicators in pages like these, and then learn everything else while trading in demo accounts.

Gary Burton - Forex Analyst

The three-moving average crossover strategy is a trading strategy that uses 3 exponential moving averages of various lengths &#; 9 EMA, 21 EMA, and 55 EMA.  All moving averages are lagging technical indicators however when used correctly, can help frame the market for a trader.

Using moving averages, instead of buying and selling at any location on the chart, can have traders zoning in on a particular chart location.  From there, traders can use various simple price action patterns to decide on a trading opportunity.

You can see how MA&#;s can give you information about market states by looking at the Alligator trading strategy that I posted a while ago.

Why A 3 EMA Crossover Strategy?

There is no magic in moving averages but they can be used to form the basis of a simple trading strategy that works.  You can develop many strategies using moving averages but remember that complex trading strategies are not always best.

Both day traders and swing traders can benefit from a moving average.

The benefits of using a triple exponential moving averages trading strategy?

1. Shows us the longer-term trend direction and if the shorter-term trend is in our favor
2. We can see a shorter-term trend to determine if we will be taking a with-trend or counter-trend trade

You must keep in mind that the lagging nature of moving averages, even EMA&#;s, will not enable picking tops and bottoms. That is not a bad thing as times when the trend is changing can make for some sloppy trading conditions.

The main difference between using 2 moving averages, such as the Golden Cross strategy, and 3 averages is having a longer-term trend direction.

The Triple Moving Averages &#; What Do They Represent?

As I mentioned, the 3 exponential moving averages will have a different lookback period and they will be:

• 9-period exponential moving average
• period exponential moving average
• 55 period exponential moving average (some will use the 50 EMA moving average but it doesn&#;t really matter)

55 Period EMA

The period long-term moving average will be considered the longer-term trend direction indicator:

• When the 55 EMA is below both the 9 and 21, we will consider the trend to be up
• When the indicator is above both of the shorter-term moving averages, we will consider the longer-term trend to be down

21 Period EMA

The period exponential moving average is considered a medium-term trend indicator:

• We want to see the 21 below the 9 and above the 55 for an uptrend
• The 21 should be above the 9 and below the 55 for a downtrend

9 Period EMA

The 9-period short-term moving average will be seen crossing over and under the 21 period more times than crossing the

• The 9 EMA crossing over the 21 while already above the 55, is an uptrend and looking for a buy trade
• If it crosses below the 21 EMA while already below the 55 EMA, that is a downtrend and looking for a sell trade

There will be many times when the 9 EMA will crossover the period exponential moving average which will turn the short-term trend against the longer-term trend. There can be trading opportunities in line with the shorter-term trend and against the longer-term trend direction.  Your trading strategy has to outline exactly what trades you will take.

When we get a mix of trend directions, we are conservative with profit targets and must exit when facing adverse price action.

You can use simple moving averages with this approach however they will not be as responsive to price changes.  The SMA is a slower-moving average in regard to changes in price.  Given we are using multiple moving averages that must line up, EMA&#;s are the better choice.

Trading Strategy With Three Moving Averages

While we could simply trade an EMA cross, that is not the best way of using the 3 EMA&#;s.  Expect a lot of whipsaw if you decide to take a trade based on only a crossover of any moving averages.  Setting up and testing a moving average trading strategy that you will use is key to finding trading success.

You can tell a lot about the market from the state of the moving averages:

• When the indicators are jumbled together, consider the market to be in a trading range
• When the faster-moving average starts to pull away from the others, consider momentum entering the market
• Seeing the 9 21 ema crossover and separating, we are looking at a trending market
• When all the averages line up, a strong trend is in play

From those four items, we can determine what type of trading setups we need to enter the market.  We will also consider using support and resistance to help us determine a trade setup.

Trading Rules &#; Buy Trade

This is a daily stock chart with two different setups with an obvious market trend to the upside &#; a bullish trend.

1. The 9 EMA has crossed to the upside and the noted arrow closes above the last swing high.  This is a short-term resistance level that is broken
2. Price has pulled back and the 9 EMA crosses to the upside.  Traders would have to wait until there is a close above the last swing high

Using price, market structure, and the EMA&#;s, you found yourself in two pretty good trades depending on your approach to using the trading signals provided.

Continuation Trade &#; One Example

Once we are in a confirmed trend, we can look for the 9-period exponential moving average to cross over the 21 EMA which reverses the short-term trend direction.

Our first chart example didn&#;t really have a trend occurring until after the second trade as shown by the exponential moving averages.

We can use the same rules for a continuation trade:  look for a swing high to be taken out once the 9/21 cross back in an uptrend direction.

This a daily stock chart of NIO.  After a very large run-up in price, we get a continuation setup.

A legitimate setup with a close above the last swing high as there was a crossover of the 9 moving average to the upside.

Depending on where you place your stop, you&#;d have participated in the next move of a 35% run in price.

The key to continuation trades is that we need to be in a trend prior to the continuation trade.

Trading Rules &#; Short Setup

1. We use the lowest swing low of the range as the area that needs to break to consider shorts
2. The 21 EMA has crossed the 9 and crossed the 55 EMA setting up a short
3. Sell the close of the candlestick that forced the moving average crossover

The short setup is the mirror opposite of the buy setup and they share the same vital variable: we need to see a pivot low or high broken before taking the trade.

This is an hourly chart of crude oil futures.  You can see the crossover of the averages, the black arrow breaks the support level and traders enter short.

This is a very simple trading setup.

The issue is how you work your protective stops, manage your trade, and take profits.

Continuation Trade &#; Second Example

There will be times when the trend is so strong that we don&#;t get the 9 EMA crossover.

In that case, we can look for a pullback into the 9 EMA and 21 EMA.

Allow price to pullback into the zone and this chart has two trade entries:

• Failure test entry where price probes below support and are rejected
• Standard breakout and strong close trade entry

When the moving averages do not crossover, we are in a strongly trending market.  You should have a trading plan that looks to take advantage of these price moves

Stop Loss + Profit Taking + Trailing Stops

There are many ways to place your stop loss on these types of trades and there are a few things to keep in mind:

• Allow room for the price to move so avoid a tight stop loss
• Be consistent

Using the 2 X ATR allows your stop to remain outside the normal volatility and allows the price to fluctuate.

Swing Highs/Lows

Using previous swing highs or lows are a simple visual area but due to the lagging nature of moving averages, the pivots may be far from the price

This is using a 2 times the ATR from close for the stop loss.

The target is a 1R and you can adjust your stop, take partial profits, or whatever fits your trading plan.

You could use the swing low or just below the entry candlestick.  Whatever you use for your moving average trading approach, ensure you are consistent with each trade you take.

Takeaways

The lagging issue with a moving average crossover strategy can cause problems such as price moving too far too fast. This can have us getting into a trade just when the price snaps back to an average price.

The good thing is we can judge momentum based on the separation of the averages as well as the distance the price is from the averages.

Adding in the needed breaks of swing levels in all trades except the continuation of two methods ensures that the price is showing us a trending price pattern.

Having three moving averages helps us have no doubt if a market is trending or is ranging.

• If we see a separation in the averages, we have a trend
• If the price is whipping back and forth around the averages, we have a range

The first trade out of a reversal and the first pullback/continuation trade, have proven to be the most reliable.

If you don&#;t blindly trade the 3 EMA crosses, and take into account support and resistance, you could find an edge in this type of strategy where you take advantage of trend, momentum, and simple trade management and profit-taking routine.