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.
Installing and preparing the ema strategy
The ema strategy can be used in any trading platform without exception, since this indicator is present in all exchange platforms known to us.
In order to build a strategy, plot exponential moving averages with the following parameters: 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 launch the strategy on any chart.
To apply the template, go to the end of the article and download it. Next, you should install the EMA strategy template script into the trading platform. To do this, go to the file menu in an open terminal and run the “Data directory” menu item.
You will see a list of system folders, among which find Template and drop the file downloaded at the end of the article into it. After restarting the platform, all that remains is to launch the template. Open the hourly chart of any currency pair and use the right mouse button to call up an additional menu in which you will find a template called “EMA Strategy”.
After launch, the following indicators will automatically appear on your chart:
Purpose of sliding.
Signals After launching the template, you will see that three moving averages will appear in front of you, which perform certain tasks in the strategy.
Thus, an exponential moving average with a period of 90 is responsible for determining the current trend and, as a consequence, the direction of opening positions. When analyzing a trend, the angle of inclination of the moving average and the location of the price relative to it are taken into account. If the EMA with a period of 90 is sloping downwards and the price is below it, there is a strong downward trend in the market.
If the EMA with a period of 90 is sloping upward and the price is above it, there is a strong upward trend in the market. Moving averages with periods of 5 and 10 perform a signal function when they cross, however, positions are opened purely in the direction of the global trend.
So let's move on to the signal. Signal to buy:
1) An upward trend has formed in the market, while the price is above the EMA with a period of 90, and the angle of the line is directed upward.
2) Fast EMA with period 5 (green line) crosses slow EMA with period 10 (blue line) from bottom to top.
A position should be opened purely on a new candle, and not at the very moment of intersection.
You should limit your risks at the minimum of the signal candle (at the tip of the shadow), while exiting the position occurs if the green line crosses the blue line from top to bottom. Example 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