ema strategy
The exponential moving average is one of the most effective trend indicators. EMA is one of the oldest indicators of technical analysis, which was used not only on the stock and commodity exchanges, but is also successfully used to this day in the Forex market and even when trading binary options.
This tool has become the basis for building a million different trading strategies, and its multitasking allows it to be used under any market conditions.
However, ema is primarily intended for trend analysis, so strategies based on it are usually of a trend nature.
The ema strategy is one of the most common trend trading tactics, which is based only on moving averages and no other technical analysis indicators.
Installation and preparation of EMA strategy
The EMA strategy can be used in any trading platform, without exception, since this indicator is present in all the exchange platforms we know. In order to build a strategy, apply exponential sliding average on the graph with such parameters of 5, 10, 90 and do not forget to change their color.
If you work in the foreign exchange market through the MT4 trading platform, we have prepared a special template for you, which you can install in a couple of mouse clicks and run the strategy on any graphics. In order to apply the template, go to the end of the article and make it download. Next, you should install the script of the EMA strategy template to the trading platform.
To do this, go to the menu file in the open terminal and run the "Data Catalog" menu item. A list of system folders will be displayed in front of you, among which find Template and drop the file downloaded at the end of the article. After restarting the platform, it remains only to start the template.
Open the clock schedule of any currency pair and using the right mouse button call an additional menu in which find the template with the name “EMA Strategy”. After starting on your graph, the following idychers will be automatically displayed:
The purpose of the sliding.
template, you will see that you will appear in front of you three sliding medium, which perform certain tasks in the strategy. So, the exponential sliding average with a period of 90 is responsible for determining the current trend and as a result of the direction of opening of positions. When analyzing the trend, the angle of inclination of the sliding average as well as the location of the price relative to it is taken into account.
If the EMA with a period of 90 is tilted down, and the price is under it - the market is a strong descending trend. If the EMA with a period of 90 is tilted up, and the price is above it - the market is a strong upward trend.
Sliding medium -sized ones with periods of 5 and 10 perform a signal function at their intersection, however, the positions open purely towards the direction of the global trend. So, let's move on to the signal.
The purchase signal:
1) the upward trend has formed on the market, while the price is above the EMA with a period of 90, and the angle of inclination of the line is directed upward.
2) the fast EMA with a period of 5 (green line) crosses a slow EMA with a period of 10 (blue line) from the bottom up.
The opening of the position should occur purely on a new candle, and not at the very moment of intersection. It is necessary to limit your risks at the minimum of the signal candle (on the tip of the shadow), while the output from the position occurs if the green line crosses blue from top to bottom. Example of the transaction:
Signal to sell:
1) A downward trend has formed in the market, while the price is below the EMA with a period of 90, and the angle of the line is directed downward.
2) Fast EMA with period 5 (green line) crosses slow EMA with period 10 (blue line) from top to bottom.
We enter a position only when the candle closes, and do not forget to set a stop order at the high level of the signal candle.
We exit the market and close the position only if we are knocked out by a stop order or a reverse crossing of the moving averages occurs. Example of a sell transaction:
In conclusion, I would like to note that the considered EMA strategy is primarily designed for trading with a trend, and the stronger and more confident the trend, the clearer signals with low risk you will receive.
However, due to the fact that the moving averages lag a little, you can receive quite a large number of false signals on the side section or the so-called market saw. Therefore, we recommend avoiding trading during the Asian session, and giving preference to the European one.
If you do not have time to track the reverse intersection of the moving averages in order to close the deal, you can use a static profit, but it must be at least three stop orders, otherwise the received stop orders in the sideways will not be compensated by long-term profits along the trend. Strategy ema template