You simply wait for the crossover between the 9 and 20 moving averages. When the 9 EMA crosses the 20 EMA to the upside, you have a buy signal. But when the 9 EMA crosses the 20 EMA to the downside, you have a sell signal. For buy and sell signals on the 9-30 trading strategy, wait for a candlestick to close above the high of your retracement candlestick in a bullish trend. For a bearish trend, you want a candlestick to close below the low of the retracement candlestick, where you’ll then place your sell order. This is where the 9 EMA (Exponential Moving Average) indicator comes into play.

  • The exponential moving average (EMA) is one of the most commonly utilized forex trading tools.
  • With it, you can catch a short-term trend direction or even other minor trends during a major trend.
  • The EMA recognizes that more recent movements are the most relevant movements and adjusts the weight of data accordingly.
  • Traders use variations of the settings, depending on the type of market they are looking for and what their backtesting has shown to work.
  • We highlight the area with the highest returns and it is the area with 20 or fewer trades.
  • Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

EMA’s are versatile in that the can be used to identify trend, entries and exit points. This provides a complete trade process for traders looking for a simple trend trading system. The EMA is often seen as complex in nature however, the above article shows how simple and effective this indicator can be for both novice and experienced traders alike. So on a daily chart, the current moving average value would be the average of the closing prices of the previous 10 days. The advantage of our EMA indicator strategy stands in the exponential moving average formula. It plots a much smoother EMA that gives better entries and exits.

Among the many indicators available, the 5 EMA (Exponential Moving Average) has gained popularity. In this article, we will delve into the fundamentals of the 5 EMA and its practical application in analyzing price trends. Now that we have covered some different 9 Exponential Moving Average crossover trading strategies, let us consider an example of how to trade with the 9 EMA. In this example, the idea is to get on fresh trends in the 1-minute timeframe, and the trading rules are simple. The 9 EMA calculates explicitly the average of the last nine closing prices, giving you a line on your chart that tracks the recent price trend with greater sensitivity. With it, you can catch a short-term trend direction or even other minor trends during a major trend.

By looking at the EMA crossover, we create automatic buy and sell signals. 7 is a fast support or resistance, 15 confirmation support or resistance. It’s important to thoroughly understand the strategy, practice in a demo environment, and consider your risk tolerance before applying it with real funds. When the price of a security is above the 5 EMA, it suggests a bullish sentiment and a potential upward trend. Conversely, when the price falls below the 5 EMA, it indicates a bearish sentiment and a potential downward trend.

Trading Guides

On the other hand, the 200-day EMA would likely be for long-term investors. In addition, if the time frame is longer, the weighting is less pronounced. So a shorter period of EMA will have a greater weight on recent price than a longer period. The EMA is very popular in forex trading, so much that it is often the basis of a trading strategy.

  • The reason for MA utilizing rather than merely looking at the price is that the trends don’t move in a straight line.
  • Obviously, there are many potential settings that you can use.
  • Alternatively, if the prices of an asset are below the EMA lines, it means the asset is under selling pressure.

If you want to learn my guidelines for setups off of the 21 EMA. Then check out my Compounding Growth Technique course, where I teach my bullish/bearish checklists and guidelines based on my favorite trading setup criteria. You should open trades only if both the EMA and the Parabolic SAR suggest the same price action. We need to combine the EMAs with additional indicators to ensure that we are entering the correct trend.

Using EMA in a Forex Trading Strategy

After that, you want to spot notable areas of support and resistance or trend reversals. This is because these are areas where fresh trends originate. Conversely, to get into a sell signal, wait for the 9 EMA to cross below the 21 EMA, with both lying below the 55 EMA. After that, place a sell trade entry when a candlestick closes below the last swing low. This EMA stock trading strategy is quite easy, but it requires self-discipline and adherence to the trading rules.


The EMA recognizes that more recent movements are the most relevant movements and adjusts the weight of data accordingly. Indeed, another upward EMA crossover the next day would also have been profitable, but we always like to trade the first ema crossover whenever possible. One simple methodology is to place stops under a swing high or low on the graph.

EMA Crossover Strategy

Risk management is crucial when implementing the 5 EMA strategy. Traders should set predetermined stop-loss levels below recent swing lows for long positions and above recent swing highs for short positions. Position sizes should be calculated based on risk tolerance and desired risk-reward ratios. Traders employ the 5 EMA to identify short-term trends and potential entry or exit points. takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

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Although this strategy only averaged about 5.71% per year, imagine if you had 5 to 10 markets or timeframes that you trade this on. This is a really easy strategy to backtest and can be completed in just a few minutes on the daily chart. Here’s an example of a short entry, with a stop loss (red line) above the swing level before the crossover.

Being a traditional indicator, hundreds of traders use the EMA today. Day traders use this technical indicator to determine the trend, direction, and strength of a chart. The exponential moving average formula 5 ema trading strategy used to plot our EMAs allows us to still take profits right at the time the market is about to reverse. The general rule is that we’re in an uptrend if the price trades above the moving average.

Locating the EMA either on your MT4 platform or Tradingview should not be a problem. 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. Delving deeper into the EMA strategy, we’ll uncover its versatility and efficacy in various market conditions.