EMA – Trading POC

The Best Tactics For Short Term Forex Trading

Posted on October 21, 2018 by blogger

In terms of being the best tactician in short-term forex trading, we recommend momentum trading and for good reasons, too. Its main aim is to achieve the profit target as soon as possible with as little risk possible under the volatile circumstances that surround each forex transaction. Basically, you take advantage of the momentum when it is on your side by entering the forex market either on a long or short basis.

You will require three kinds of moving averages to accomplish your purpose, namely, the moving average convergence divergence (MACD), the 100-day simple moving average (SMA), and the 20-day exponential moving average (EMA). You will see why later.

For the MACD, be sure to use the default setting on the 5-minute chart. Said default setting is: Signal ENA=9, First EMA=12, and Second EMA=26. To start on this short-term forex trading strategy, open the 5-minute chart and look for the right currency pair. This means the pair trading below the SMA and EMA. Take a look at the MACD histogram. You will enter into a long trade when the MACD starts turning positive but stay within 5 candles. Your stop loss margin must be positioned at the candles low point, which should be above the EMA and SMA.

You will exit half of your position the moment the trade changes in your favour but be sure that it is still within the amount risked. The other half of your position will follow a trailing stop within a -15 pips on the 20-day EMA. This forex trading tactic should pay off handsomely under the right circumstances.

Now, lets assume that that your chosen currency pair is trading in the opposite direction above the EMA and SMA that is. In this case, you must be patient and wait until such time that the currency pair is trading below both the EMA and SMA by 15 pips, minimum.

In reverse of the first situation, you will enter into a short trade with the MACD turning negative within 5 candles. (The first situation was go long on positive turn). Your stop loss is at the high point of the first candle breaking through the EMA and SMA. (In the first, it was at a low point). You will also exit half of your position with the other half set for a trailing stop at +15 pips on the EMA. Again, this forex trading strategy should be in your favour when you can closely monitor the charts.

There are other strategies for short-term forex transactions, of course. Two examples are the use of 2 charts, namely, the hourly and the 10-minute charts as well as the 200-bar MA. You can also explore these options but we recommend trying the momentum trading strategy first.

How Profitable Are Ema Crossovers When Trading The Currency Markets

Posted on February 8, 2018 by blogger

The Exponential Moving Average (or EMA for short) is a type of technical indicator that’s very popular with a lot of forex traders. The reason why is because it is very good at tracking the price and indicating the current trend. Plus if you use several of these EMAs (using different periods) you can get some great trading signals, particularly when these indicators cross over.

The key is to use a short-term EMA and a longer term EMA on your price chart, wait until you get a crossover and enter a trade in the same direction as this crossover. I myself like to use the EMA (5), ie a 5 period exponential moving average, alongside an EMA (20). I will also use 50, 100 and 200 period exponential moving averages on occasions as well but the 5 and 20 period moving averages are at the heart of my trading system.

So how reliable are these EMA crossovers?

Well it all depends on which time frame you use. In general the shorter the time frame the more unreliable the trading signal, and this general rule can be applied to these crossovers as well.

For instance if you think you can generate consistent profits entering positions when the EMA (5) crosses through the EMA (20) on the 1 or 5 minute charts, then you are going to end up losing money because many of these price moves are so small that any profits will be eaten up by the spreads. Plus you will get a lot of false crossovers during the course of the average trading day.

However if you apply this method to the daily or weekly chart, for instance, or even the 4 hour chart like I do, then you get much more reliable signals. In fact if you enter a position soon after the crossover takes place, you can often bank anywhere between several hundred and several thousand pips profit.

So the point I want to make is that EMA crossovers are a great way to trade the currency markets, but only if you use a longer time frame. You don’t necessarily have to use my settings either. For example you could use 7 and 21 period moving averages or 20 and 50, for instance. The key is to experiment with different settings and time frames until you are able to come up with a profitable way of trading.

If you trade these EMA crossovers and use one or two additional indicators to filter out the very best trades, then you should have a profitable system on your hands. This is my trading system in a nutshell, and it seems to work for me.

Forex Trading Signals Revealed – Trend Spotting To Make Money In Currency Trading

Posted on November 8, 2017 by blogger

Forex trading signals and learning how to interpret them are the key to the success of any trader that is making money in the forex market. Learning the ins and outs of trading trends takes a lot of time, but you don’t have to be an expert at it to be successful.

A more accomplished forex trader will spot the trend just as it begins and will see the slowing down and get out just as it is ready to decline. You don’t have to be that good, you can get in once the trend is under way and get out just after it starts to decline and still make money. You just have to be able to recognize which way it is going.

Some of the common forex indicators used in may forex trend systems that successful currency traders will use are the MACD and moving averages. When effectively used as crossover indicators, you will have the ability to recognize significant trends that will of course lead to profits.

When analyzing a short term trend against a long term trend, i.e. an EMA (5) crossing an EMA (20), you will see a positive trend developing that you should take advantage of. The same is true of a MACD crossover.

Another powerful forex indicator designed for trading trends is the TRIX or Triple Exponential Moving Average oscillator. The indicator will keep you in trends that are shorter or equal to the window period. While observing a recent day of trading, we noticed a TRIX (15,9) moving upwards on the 4 hour chart of the GPB/USD pairing. The result of this trend was actually a 100 point rise by the end of the day. If you had the experience to spot this trend, you would have made a killing!

While these are but two of the forex trend systems that you can use that you can use to generate good forex trading signals, there are many more models that are very successful. Examples of these are indicators like the Supertrend and the ADX.

The Supertrend is extremely effective as its’ sole design was to pinpoint trends in the currency market. You can only imagine by it’s name how successful this has been. If you are using the ADX, it may be a little more difficult to read the trends, but it is just as useful when you know what you are doing and define ranges of profitability. For instance, when there are crosses in the 17 to 23 levels, I know it is a go. Movement in the DI+ and the DI- will let you know which side of the market to get on.

While you will hear people preach the positives of each of these forex trading signals on their own, becoming familiar with all of them is a good idea. Look at it as arming yourself with more weapons to go into battle with. Make sure a trend spotting forex strategy is part of your arsenal. The more forex indicators that you see a positive trend in, the more likely you are in spotting a legitimate trend that you can take advantage of.

Forex Trading-complementing Strengths Of Adx And Rsi

Posted on November 2, 2017 by blogger

In this article we will see how the Average Directional Index (ADX) and Moving averages may indicate that we can take a trading position and Relative Strength Index (RSI) and MACD crossover to indicate the entry/exit point.

In Forex trading the volatility in general is quite high and the trends can change very dynamically. Uptrend to sideways move to downtrend to uptrend may take place even during one life cycle of a trade. Of course we are not talking about trades where we enter and close within hours.

Combining selected technical indicators comes in handy is such dynamically changing markets.

It is always better to combine the chosen technical indicators for the trading decisions. While we talk about combining we are not talking about selecting similar indicators to cross check on each other.

Before we take our trading decisions, we need to analyze the Trend situation:

– Is it a strong trend?
– Is the trend becoming stronger?
– Is the trend becoming weaker?
– Is the market running sideways without a clear trend
– It has been a trend but a reversal may be on the way
– A break out from the sideways movement is probable

Trend identification is one of the important starting points before taking a position.

How to identify the trend:

ADX: ADX above 25 and rising
EMA (for uptrend): The prices closing above Moving Average (say 5 to 20 periods for short term trading and 20 to 60 periods for medium term trades). So the price action is above the moving average line and we have a rising moving average line. And this shows a uptrend. ADX being the same if price action was below the MA line and if the moving average line was dropping then it would have indicated a downtrend.

Now once we identify the trend situation we need to decide on the entry and possible exit. Apart from entry we also need to think about stop-loss levels and targets for taking profit. Lets start with entry point.

As far as entry point is concerned we can use various crossover methods like cross over of MACD with signal line or shorter period SMA (simple moving average)or EMA (exponential moving average) crossover with longer period of the corresponding moving average line. But lets bring in RSI (Relative Strength Index) here. RSI indicates overbought (hence probable selling levels) and oversold (hence probable buying levels). But will overbought and oversold indications work when the trend is very strong? Well the answer would be “Not”. But if we apply RSI with the knowledge of the trend as mentioned above then we may be able to take better decisions.

So let’s see how to combine technical indicators. We are talking about combining the indicators which we have mentioned above i.e. ADX, Moving Averages and RSI.

Lets consider the following scenarios:

– Strong trend
– Trend becoming stronger
– Trend becoming weaker
– Market is running sideways
– A reversal may be on the way
– A break out from the sideways movement is probable

1) Strong trend:

ADX is above 30 and rising further. Price action is continuously over 20 periods EMA and EMA line is rising.

The above indicates a strong uptrend. We can not wait for oversold and overbought signals from oscillators such as RSI in strong trends as the price can be in overbought area for long in strong uptrend and vice versa. So how to go about entering the market in such situation?

1) Entry: Buy when RSI (Relative Strength Index) goes to the range of 68/71.

2) Exit: Exit the buy position i.e. take profit when ADX stops rising and/or RSI drops below 50 and/or price action closes below the 20 days EMA. The take-profit targets mentioned are indicative as the exit depends on market situation/volatility and the decisions need to be dynamic. In strong trends it is advisable to use trailing stop-losses and rising take-profit levels.

3) Stop-Loss: As mentioned above its is better to use trailing stop-losses. Stop-losses levels even with trailing levels would depend upon the volatility. if the price movement is quite volatile then the stop-loss margins would be wide. We may decide to put a stop loss a few pips below the previous candle’s low. We can also use SAR (stop and reverse) indicator to indicate the stop-loss levels. As mentioned if the market is very volatile then the stop-loss margin has to be more otherwise even if upward movement continues, the narrow stop-loss margin may close the position with a loss. .

2) Trend getting stronger:
(lets consider an uptrend)

ADX is above 25 and rising. Price is closing over 20 periods EMA and EMA line is rising. This gives an indication that its an uptrend and the trend may become stronger.

1) Entry: Buy when RSI (Relative Strength Index) goes below 50 mark.

2) Exit: Exit or take profit when ADX stops rising and/or RSI goes below 40/42 and/or price action closes below the 14 days EMA. The take-profit targets mentioned are indicative as the exit also depends on various factors and market situation/volatility and the decisions need to be dynamic.

3) Stop-Loss orders: Use trailing stop-losses. Stop-losses would depend upon the volatility. if the price action is very volatile then the stop-loss would be wide. It could be a few pips below the previous candle’s low. As mentioned if the market is very volatile then the stop-loss margin should not be very close to the entry level otherwise even if upward movement continues, the narrow stop-loss margin can close the position with a loss, if price takes some corrective action. Stop loss could be a few pips below the previous candle’s low. As mentioned in above example we can use SAR to indicate the stop-loss levels.

3) Trend getting weaker:

ADX is above 25 but not rising. The 20-period EMA is getting flatter.

1) Entry: Buy when RSI (Relative Strength Index) goes below 50.
2) Exit: Exit or take profit price closes below 14-period EMA. The take-profit targets mentioned are indicative as the exit also depends on various factors and market situation and volatility and the decisions need to be dynamic.
3) Stop-Loss orders: Use trailing stop-losses. Stop-losses would depend upon the volatility. if the price movement is quite volatile then the stop-loss would be wide. It could be a few pips below the previous candle’s low.

In the above examples we have considered an uptrend. During the downtrend we can take short-positions when the EMA line is dropping down and price action remains below EMA, which is opposite to uptrend. ADX readings should remain same as above example because ADX reading only indicates the strength of the trend but not the direction. And we can take short-position when RSI (Relative Strength Index) moves over 50 mark.