Education post 19/100 – How to trade With Moving Averages?
There are no trading strategies that will generate a profit every single time, but there are some really basic strategies that can produce some pretty good results.
The Key to Success
What you are basically trying to do is identify pairs that are in strong trends on two longer time frames, and then enter a position when you get an EMA crossover in the same direction on one of the shorter time frames because this is an example of a high probability trade.
This is a lot more profitable than sticking to a single time frame, and is a strategy that many people, including myself, use to generate profits on a regular basis.
Exit Strategies
With regards to exit strategies, you have many options. One option is to run the position until the EMAs cross back in the other direction, ie when the trend runs to its conclusion, which can sometimes yield huge returns, but another option is to look to make a certain number of pips per trade, and move your stop loss to break-even as soon as it is in profit, which is another good strategy.
Final Thoughts
The point is that there are many ways that you can profit from the EMA crossover strategy, and the great thing is that you only really need to use two simple technical indicators.
You don’t need to stick to the 5 and 20-period settings either because you may find that you get equally good results from using a 10 and 20-period EMA crossover strategy instead.
Similarly, if you take a long-term view, the golden cross (upward crossover) and death cross (downward crossover) of the 50 and 200-day EMAs can be even more profitable if you wait for a pull-back and enter at the right time because the resulting price moves can be thousands of pips.
The Key to Success
What you are basically trying to do is identify pairs that are in strong trends on two longer time frames, and then enter a position when you get an EMA crossover in the same direction on one of the shorter time frames because this is an example of a high probability trade.
This is a lot more profitable than sticking to a single time frame, and is a strategy that many people, including myself, use to generate profits on a regular basis.
Exit Strategies
With regards to exit strategies, you have many options. One option is to run the position until the EMAs cross back in the other direction, ie when the trend runs to its conclusion, which can sometimes yield huge returns, but another option is to look to make a certain number of pips per trade, and move your stop loss to break-even as soon as it is in profit, which is another good strategy.
Final Thoughts
The point is that there are many ways that you can profit from the EMA crossover strategy, and the great thing is that you only really need to use two simple technical indicators.
You don’t need to stick to the 5 and 20-period settings either because you may find that you get equally good results from using a 10 and 20-period EMA crossover strategy instead.
Similarly, if you take a long-term view, the golden cross (upward crossover) and death cross (downward crossover) of the 50 and 200-day EMAs can be even more profitable if you wait for a pull-back and enter at the right time because the resulting price moves can be thousands of pips.