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The “Double EMA” trading strategy
Moving averages (or “movings”) are a basic indicator of market technical analysis. There are many varieties of them. For example, there are more than 10 types on the Binomo trading platform. This article is a review of a trading strategy based on the use of two EMAs. This type of MA differs from conventional movings in that there is smoothing, which makes it possible to somewhat increase the accuracy of the signals.
The Moving Average type Exponential in comparison with a simple moving average is more sensitive to price fluctuations. This makes it possible to reduce lags by about 10%, which is especially noticeable during high volatility of the market and sharp price jumps. The EMA calculation formula works in such a way that the position of the indicator line is more affected by the most recent price formations on the chart.
Preliminary preparation
It is necessary to choose the asset, timeframe, and expiration time based on the time interval, etc. Also we need two EMAs with different periods. We will enter the market on the trading signals of these indicators in the form of the intersection of two lines.
Moving Average settings:
 slow line: period вЂ” 22, color вЂ” blue, type вЂ” Exponential;
 fast line: period вЂ” 8, color вЂ” red, type вЂ” Exponential.
The remaining parameters should be left at the default values.
Signal for options “Up”
The positions of the two Exponential Moving Average lines on the chart indicate which type of trend is currently active. If there is a red (fast) line on top, this signals an upward trend. When the price moves in the opposite direction then there will be a slow (blue) line on top, and the red one will be moving downwards. The distance between the EMAs shows the intensity of the discrepancy, which in turn indicates the market strength of the current trend.
The optimal entry point for the market is the moment the trend begins. At this time, there is an intersection of the EMA, when the slow moving breaks through the fast one from its position from below. At this point, you need to open a trade on an increase.
Signal for options “Down”
Entering the market with a trade on a decrease should be done at the very beginning of a downward trend. For this we will be helped by the EMA lines and their intersection when the fast red moving breaks through the slow one.
The terms for the expiration of options should be from 2 to 4 candles. For example, on a 15second and 30second chart, you can trade shortterm fixed 1minute contracts.
An example of trading on the “Double EMA”
We only publish on our site quality strategies, the effectiveness of which has been verified by us in practice. Therefore, specifically for this article, we opened one transaction according to the signals, screening the process in real time.
We had $275 in our account, which was a real account, rather than a training (demo) one. At the time of writing this article, it was a weekend, so only one asset was available – CRYPTO IDX. This is what weвЂ™ll trade on.
We configure the trading terminal according to the requirements of the strategy. We wait for the signal. At the moment of the intersection of the lines, signaling the beginning of a downward trend, we buy an option “Down” for $10. The above picture is taken about a minute after the purchase, when there were 27 seconds left before expiration. ThatвЂ™s why the chart clearly shows the behavior of the price after the opening of the transaction.

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The trend turned out to be the standard length for this asset, so we got our profit on the trade, which was almost $8. CRYPTO IDX is an asset with a fairly high yield (usually 79% or higher). Therefore, you can make a profit on it even on weekends when the interbank foreign exchange market is not open.
Money management and other nuances
Money management is a set of capital management rules that allow the trader to retain their investment when trading on shortterm financial markets, which is associated with high risks. This is a whole system which must be mastered by all novice traders. However, the basic principles need to be observed immediately. First and foremost, money management prohibits the trading of more than 45% of the account.
Regarding the accuracy of signals. There is no strategy that results in 100% or even 90% reliable signals. Even with the best solutions on the market, this figure reaches a maximum of 75%. Therefore, the inherent quality of a successful trader is the ability to “feel” the market, catching signs that arenвЂ™t visible at first glance, for example, the combination of EMA signals with others, for example, with candlestick patterns.
One of these nuances is the level of market volatility. The greater the distance between movings before the reversal of the trend and entering the market, the higher the probability that the option will close with a profit.
вЂњGeneral Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.вЂќ
How to Trade With Exponential Moving Average Strategy
The exponential moving average is the oldest form of technical analysis. It is one of the most popular trading indicators used by thousands of traders. In this stepbystep guide, you’ll learn a simple exponential moving average strategy. Use what you learn to turn your trading around and become a successful, longterm trader! A moving average can be a very effective indicator. Many traders use exponential moving averages, an effective type of moving average indicator, to trade in a variety of markets.
An exponential moving average strategy, or EMA strategy, is used to identify the predominant trend in the market. It can also provide the support and resistance level to execute your trade.
Our team at Trading Strategy Guides has already covered the topic, trend following systems. You can review the trend here, MACD Trend Following Strategy – Simple to Learn Trading Strategy. You can also learn the basics of support and resistance here, Support and Resistance Zones – Road to Successful Trading.
Make sure you go through the recommended articles if you want to better understand how the market works. Building a foundation of understanding will help you dramatically improve your outcomes as a trader.
The Exponential Moving Average EMA Strategy is a universal trading strategy that works in all markets. This includes stocks, indices, Forex, currencies, and the cryptocurrencies market, like the virtual currency Bitcoin. If the exponential moving average strategy works on any type of market, they work for any time frame. In simple terms, you can trade with it on your preferred chart. Also, read the hidden secrets of moving average.
Let’s first examine what a moving average is and the exponential moving average formula. After, we will dive into some of the key rules of the exponential moving average strategy,
Exponential Moving Average Formula and Exponential Moving Average Explained
The exponential moving average is a line on the price chart that uses a mathematical formula to smooth out the price action. It shows the average price over a certain period of time. The EMA formula puts more weight on the recent price. This means it’s more reliable because it reacts faster to the latest changes in price data.
An exponential moving average tries to reduce confusion and noise of everyday price action. Second, the moving average smooths the price and reveals the trend. It even sometimes reveals patterns that you can’t see. The average is also more reliable and accurate in forecasting future changes in the market price.
There are 3 steps for the exponential moving average formula and calculating the EMA. The formula uses a simple moving average SMA as the starting point for the EMA value. To calculate the SMA, take the sum of the number of time periods and divide by 20.
We need a multiplier that makes the moving average put more focus on the most recent price.
The moving average formula brings all these values together. They make up the moving average.
The exponential moving average formula below is for a 20day EMA:
Initial SMA = 20period sum / 20
Multiplier = (2 / (Time periods + 1) ) = (2 / (20 + 1) ) = 0.0952(9.52%)
EMA = x multiplier + EMA(previous day).
The general rule is that if the price trades above the moving average, we’re in an uptrend. As long as we stay above the exponential moving average, we should expect higher prices. Conversely, if we’re trading below, we’re in a downtrend. As long as we trade below the moving average, we should expect lower prices.
Before we go any further, we always recommend writing down the trading rules on a piece of paper. This exercise will step up your learning curve and you’ll become a better trader.
Let’s get started…
Exponential Moving Average Strategy
(Trading Rules – Sell Trade)
Our exponential moving average strategy is comprised of two elements. The first degree to capture a new trend is to use two exponential moving averages as an entry filter.
By using one moving average with a longer period and one with a shorter period, we automate the strategy. This removes any form of subjectivity from our trading process.
Step #1: Plot on your chart the 20 and 50 EMA
The first step is to properly set up our charts with the right moving averages. We can identify the EMA crossover at the later stage. The exponential moving average strategy uses the 20 and 50 periods EMA.
Most standard trading platforms come with default moving average indicators. It should not be a problem to locate the EMA either on your MT4 platform or Tradingview.
Now, we’re set to go a look more closely to the price structure. This brings us to the next step of the strategy.
Step #2: Wait for the EMA crossover and for the price to trade above the 20 and 50 EMA.
The second rule of this moving average strategy is the need for the price to trade above both 20 and 50 EMA. Secondly, we need to wait for the EMA crossover, which will add weight to the bullish case.
We refer to the EMA crossover for a buy trade when the 50EMA crosses above the 50EMA.
By looking at the EMA crossover, we create an automatic buy and sell signals.
Since the market is prone to false breakouts, we need more evidence than a simple EMA crossover. At this stage, we don’t know if the bullish sentiment is strong enough to push the price further after we buy to make a profit.
To avoid the false breakout, we added a new confluence to support our view. This brings us to the next step of the strategy.
Step #3: Wait for the zone between 20 and 50 EMA to be tested at least twice, then look for buying opportunities.
The conviction behind this moving average strategy relies on multiple factors. After the EMA crossover happened, we need to exercise more patience. We will wait for two successive and successful retests of the zone between the 20 and 50 EMA.
The two successful retests of the zone between 20 and 50 EMA give the market enough time to develop a trend.
Never forget that no price is too high to buy in trading. And no price is too low to sell.
Note* When we refer to the “zone between 20 and 50EMA,” we actually don’t mean that the price needs to trade in the space between the two moving averages.
We just wanted to cover the whole price spectrum between the two EMAs. This is because the price will only briefly touch the shorter moving average (20EMA). But this is still a successful retest.
Now, we still need to define where exactly we are going to buy. This brings us to the next step of the strategy.
Step #4: Buy at the market when we retest the zone between 20 and 50 EMA for the third time.
If the price successfully retests the zone between 20 and 50 EMA for the third time, we go ahead and buy at the market price. We now have enough evidence that the bullish momentum is strong to continue pushing this market higher.
Now, we still need to define where to place our protective stop loss and where to take profits. This brings us to the next step of the strategy.
Step #5: Place the protective Stop Los 20 pips below the 50 EMA
After the EMA crossover happened, and after we had two successive retests, we know the trend is up. As long as we trade above both exponential moving averages the trend remains intact.
In this regard, we place our protective stop loss 20 pips below the 50 EMA. We added a buffer of 20 pips because we understand we’re not living in a perfect world. The market is prone to do false breakouts.
The last part of our EMA strategy is the exit strategy. It is based again on the exponential moving average.
Step #6: Take Profit once we break and close below the 50EMA
In this particular case, we don’t use the same exit technique as our entry technique, which was based on the EMA crossover.
If we waited for the EMA crossover to happen on the other side, we would have given back some of the potential profits. We need to consider the fact that the exponential moving averages are a lagging indicator.
The exponential moving average formula used to plot our EMAs allow us to still take profits right at the time the market is about to reverse.
Note** The above was an example of a BUY trade. Use the same rules – but in reverse – for a SELL trade. However, because the market goes down much faster, we sell on the 1st retest of the zone between 20 and 50. After the EMA crossover happened.
In the figure below, you can see an actual SELL trade example, using our strategy.
Summary
The exponential moving average strategy is a classic example of how to construct a simple EMA crossover system. With this exponential moving average system, we’re not trying to predict the market. We’re trying to react to the current market condition, which is a much better way to trade.
The advantage of our trading strategy stands in the exponential moving average formula. It plots a much smoother EMA that gives better entries and exits.
We understand there are different trading styles. If following term trends are not for you, try reading our Best Short Term Trading Strategy – Profitable Short Term Trading Tips. It reveals a shortterm trading trick used by institutional traders.
Thank you for reading!
Please leave a comment below if you have any questions about the Moving Average Strategy!
Also, please give this strategy a 5 star if you enjoyed it!
(73 votes, average: 4.34 out of 5)
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How to Trade With Exponential Moving Average Strategy
The exponential moving average is the oldest form of technical analysis. It is one of the most popular trading indicators used by thousands of traders. In this stepbystep guide, you’ll learn a simple exponential moving average strategy. Use what you learn to turn your trading around and become a successful, longterm trader! A moving average can be a very effective indicator. Many traders use exponential moving averages, an effective type of moving average indicator, to trade in a variety of markets.
An exponential moving average strategy, or EMA strategy, is used to identify the predominant trend in the market. It can also provide the support and resistance level to execute your trade.
Our team at Trading Strategy Guides has already covered the topic, trend following systems. You can review the trend here, MACD Trend Following Strategy – Simple to Learn Trading Strategy. You can also learn the basics of support and resistance here, Support and Resistance Zones – Road to Successful Trading.
Make sure you go through the recommended articles if you want to better understand how the market works. Building a foundation of understanding will help you dramatically improve your outcomes as a trader.
The Exponential Moving Average EMA Strategy is a universal trading strategy that works in all markets. This includes stocks, indices, Forex, currencies, and the cryptocurrencies market, like the virtual currency Bitcoin. If the exponential moving average strategy works on any type of market, they work for any time frame. In simple terms, you can trade with it on your preferred chart. Also, read the hidden secrets of moving average.
Let’s first examine what a moving average is and the exponential moving average formula. After, we will dive into some of the key rules of the exponential moving average strategy,
Exponential Moving Average Formula and Exponential Moving Average Explained
The exponential moving average is a line on the price chart that uses a mathematical formula to smooth out the price action. It shows the average price over a certain period of time. The EMA formula puts more weight on the recent price. This means it’s more reliable because it reacts faster to the latest changes in price data.
An exponential moving average tries to reduce confusion and noise of everyday price action. Second, the moving average smooths the price and reveals the trend. It even sometimes reveals patterns that you can’t see. The average is also more reliable and accurate in forecasting future changes in the market price.
There are 3 steps for the exponential moving average formula and calculating the EMA. The formula uses a simple moving average SMA as the starting point for the EMA value. To calculate the SMA, take the sum of the number of time periods and divide by 20.
We need a multiplier that makes the moving average put more focus on the most recent price.
The moving average formula brings all these values together. They make up the moving average.
The exponential moving average formula below is for a 20day EMA:
Initial SMA = 20period sum / 20
Multiplier = (2 / (Time periods + 1) ) = (2 / (20 + 1) ) = 0.0952(9.52%)
EMA = x multiplier + EMA(previous day).
The general rule is that if the price trades above the moving average, we’re in an uptrend. As long as we stay above the exponential moving average, we should expect higher prices. Conversely, if we’re trading below, we’re in a downtrend. As long as we trade below the moving average, we should expect lower prices.
Before we go any further, we always recommend writing down the trading rules on a piece of paper. This exercise will step up your learning curve and you’ll become a better trader.
Let’s get started…
Exponential Moving Average Strategy
(Trading Rules – Sell Trade)
Our exponential moving average strategy is comprised of two elements. The first degree to capture a new trend is to use two exponential moving averages as an entry filter.
By using one moving average with a longer period and one with a shorter period, we automate the strategy. This removes any form of subjectivity from our trading process.
Step #1: Plot on your chart the 20 and 50 EMA
The first step is to properly set up our charts with the right moving averages. We can identify the EMA crossover at the later stage. The exponential moving average strategy uses the 20 and 50 periods EMA.
Most standard trading platforms come with default moving average indicators. It should not be a problem to locate the EMA either on your MT4 platform or Tradingview.
Now, we’re set to go a look more closely to the price structure. This brings us to the next step of the strategy.
Step #2: Wait for the EMA crossover and for the price to trade above the 20 and 50 EMA.
The second rule of this moving average strategy is the need for the price to trade above both 20 and 50 EMA. Secondly, we need to wait for the EMA crossover, which will add weight to the bullish case.
We refer to the EMA crossover for a buy trade when the 50EMA crosses above the 50EMA.
By looking at the EMA crossover, we create an automatic buy and sell signals.
Since the market is prone to false breakouts, we need more evidence than a simple EMA crossover. At this stage, we don’t know if the bullish sentiment is strong enough to push the price further after we buy to make a profit.
To avoid the false breakout, we added a new confluence to support our view. This brings us to the next step of the strategy.
Step #3: Wait for the zone between 20 and 50 EMA to be tested at least twice, then look for buying opportunities.
The conviction behind this moving average strategy relies on multiple factors. After the EMA crossover happened, we need to exercise more patience. We will wait for two successive and successful retests of the zone between the 20 and 50 EMA.
The two successful retests of the zone between 20 and 50 EMA give the market enough time to develop a trend.
Never forget that no price is too high to buy in trading. And no price is too low to sell.
Note* When we refer to the “zone between 20 and 50EMA,” we actually don’t mean that the price needs to trade in the space between the two moving averages.
We just wanted to cover the whole price spectrum between the two EMAs. This is because the price will only briefly touch the shorter moving average (20EMA). But this is still a successful retest.
Now, we still need to define where exactly we are going to buy. This brings us to the next step of the strategy.
Step #4: Buy at the market when we retest the zone between 20 and 50 EMA for the third time.
If the price successfully retests the zone between 20 and 50 EMA for the third time, we go ahead and buy at the market price. We now have enough evidence that the bullish momentum is strong to continue pushing this market higher.
Now, we still need to define where to place our protective stop loss and where to take profits. This brings us to the next step of the strategy.
Step #5: Place the protective Stop Los 20 pips below the 50 EMA
After the EMA crossover happened, and after we had two successive retests, we know the trend is up. As long as we trade above both exponential moving averages the trend remains intact.
In this regard, we place our protective stop loss 20 pips below the 50 EMA. We added a buffer of 20 pips because we understand we’re not living in a perfect world. The market is prone to do false breakouts.
The last part of our EMA strategy is the exit strategy. It is based again on the exponential moving average.
Step #6: Take Profit once we break and close below the 50EMA
In this particular case, we don’t use the same exit technique as our entry technique, which was based on the EMA crossover.
If we waited for the EMA crossover to happen on the other side, we would have given back some of the potential profits. We need to consider the fact that the exponential moving averages are a lagging indicator.
The exponential moving average formula used to plot our EMAs allow us to still take profits right at the time the market is about to reverse.
Note** The above was an example of a BUY trade. Use the same rules – but in reverse – for a SELL trade. However, because the market goes down much faster, we sell on the 1st retest of the zone between 20 and 50. After the EMA crossover happened.
In the figure below, you can see an actual SELL trade example, using our strategy.
Summary
The exponential moving average strategy is a classic example of how to construct a simple EMA crossover system. With this exponential moving average system, we’re not trying to predict the market. We’re trying to react to the current market condition, which is a much better way to trade.
The advantage of our trading strategy stands in the exponential moving average formula. It plots a much smoother EMA that gives better entries and exits.
We understand there are different trading styles. If following term trends are not for you, try reading our Best Short Term Trading Strategy – Profitable Short Term Trading Tips. It reveals a shortterm trading trick used by institutional traders.
Thank you for reading!
Please leave a comment below if you have any questions about the Moving Average Strategy!
Also, please give this strategy a 5 star if you enjoyed it!
(73 votes, average: 4.34 out of 5)
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Best Choice For Beginners!
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Free Trading Education!
Free Demo Account!