swing trading advanced 55 ema strategy

There are many ways to trade the securities industry using the Exponential Poignant Average (EMA).

But the most common way traders habit these EMAs to trade is with the trend.

The conception is simple…

Let's use two EMAs with different periods as an example.

If the turn down period EMA crosses above the high period EMA, and so the grocery store is deemed to be in an uptrend.

And if the lower period EMA crosses below the high period EMA, then the market is deemed to be in a downtrend.

But here's where many traders go vicious…

Many beginner traders see the crossover arsenic a signal to go either Long or Chunky.

If the lower period EMA crosses above the higher period EMA, they give-up the ghost Drawn-out.

And if the lower historical period EMA crosses below the higher period EMA, they go Short.

That's a surefire right smart to go broke.

You potty see in the chart above that if you had gone Far or Short each meter the EMAs crossed over, you would constantly be obstructed verboten of your trades.

You see, this method acting of trading the EMA crossovers did bring off decades ago when processed charts weren't invented nevertheless and traders had to hand-trace their charts.

Merely ever since the digital age came along where whatsoever trader can have access to charts and dozens of indicators, that EMA crossover trading strategy no longer worked.

Indeed or else of entering into a trade when the EMAs crossover, use it as an indication that an uptrend or downtrend mightiness embody forming.

Now, you might be wondering…

"How past can I use EMAs to get into a trade?"

The answer…

Trading pullbacks.

Exploitation EMAs to Trade Pullbacks

So what are pullbacks and why trade them?

One of the most popular trading strategies when trading any market is to trade pullbacks.

Pullbacks are too unremarkably titled retracements.

And the understanding they are identical nonclassical is that when markets cu, they do not just rise in a straight line.

There's always a period of "rest" before continuing the curve.

Information technology's like going on a long road trip and taking toilet breaks every erst in a patc before continuing on the trip.

When markets are in an uptrend, they form high highs and higher lows.

These high lows are the "pullbacks".

Conversely, when markets are in a downtrend, they form lower lows and lower highs.

In a downtrend, these take down highs are the pullbacks.

Markets ALWAYS have these pullbacks when trending and these are great opportunities for traders to move in a barter before the market resumes its trend.

Indeed how do you trade pullbacks?

Piece there are many ways to business deal pullbacks, away far my favorite way to practice soh is using an EMA trading strategy.

Wherefore Use EMA and Not SMA?

First of all, I want to address why we are using EMAs for our pullback trading scheme.

While there are many different types of tumbling averages, the two usually used ones are the EMA and Simple Traveling Average (SMA).

So for trading pullbacks, why execute we want to employ the EMA and non the SMA?

Easily, eldest of all, I deprivation to state that both moving averages are viable to trade pullbacks.

But here's why I prefer using the EMA:

If you were to plot the EMA and SMA on the graph, you will notice that the EMA tends to stick closer to price.

And so when trading pullbacks operating theater retracements, victimization EMAs would lean to make the market look like information technology is "healthy" off the EMAs.

With the SMAs, while you can do trade pullbacks with information technology, it ISN't as "viscid" A the EMA.

Thence EMAs would atomic number 4 better for our trading scheme.

The 50 EMA Leaping Trading Strategy

Now, I want to start polish off by saying that this setup doesn't happen often but when information technology does, IT works really cured.

For this strategy, we are going to use the 20 EMA and 50 EMA.

We only want to take Long trades when the 20 EMA is above the 50 EMA.

And we only want to take Curt trades when the 20 EMA is below the 50 EMA.

If you take a look at this graph below, you will see that the market has bounced off the EMAs several multiplication.

Even so, there are more times where the market ignores the EMAs and simply goes through them.

So how cause we roll in the hay when the market bequeath bounce sour the EMAs?

Alas, that is a trick doubt.

We will ne'er know when the grocery will recoil off the EMAs.

However, we can speculate when there might atomic number 4 a good probability of the market bouncing off the EMAdannbsp; by seeing if the market has bounced off the EMAs before.

So first of all of wholly, we want to wait for a crossover of the EMAs.

Let's take a look after at a Long trade.

First, search the 20 EMA to mark above the 50 EMA.

Once the 20 EMA has cross-town above the 50 EMA, we want to face for the 1st bounce bump off the 50 EMA.

If the market didn't bounce off the EMA and just went direct information technology, then we want to wait until a leaping occurs in front we consider that the 1st bounce.

In this chart above, the market antitrust went direct on a lower floor the EMA without bouncing off the basic sentence.

Only the second metre it touched the 50 EMA, it bounced off.

That will be considered the 1st bounce.

From there, we will be looking for the 2nd bounce to get into a Far swap.

Long Entry Criteria

Forthwith that we suffer our 1st bounce off the 50 EMA, we are looking to go Longsighted happening the 2nd bounce.

Withal, we don't want to go Long every time the market touches the 50 EMA after the 1st recoil.

That's because it can still devour the EMA without bouncing off.

So we need to have a trade entry criteria to go Agelong.

To go Long on the 2nd bounce, we lack to attend 3 things happen:

A "hidden" divergence on the stochastic indicator.
A optimistic candlestick pattern forming.
A close above the bullish candlestick pattern.

Let's take a look at an representative:

In the chart above, we experience the 20 EMA just intercrossed complete the 50 EMA.

Immediately after the EMA crossover, we have identified our 1st bounce.

Straight off that we have identified our 1st bounce, we now wait for a 2nd bounce.

Once the 2nd bounce has appeared, we look to the stochastic indicator to see if there is a hidden divergence.

As you can undergo, the market is making higher lows but the stochastic index number is making lower lows.

This is a out of sight divergency.

The next step is to waitress for a bullish candlestick to form.

In the chart above, a Bullish Knifelike Candlestick Radiation diagram formed happening the 2nd bounce.

To go Monthlong, we wait for a close above the senior high of the Bullish Piercing Candlestick and we place our Stop Loss below the low of the previous swing low-down.

Our Take apart Profit level will be at 1.5R or 2R.

Short Entry Criteria

To enter into a Short trade, it is the opposite of a Long trade.

So to run along Short happening the 2nd bounce, we want to assure 3 things hap:

A "hidden" divergence along the stochastic index.
A bearish candlestick pattern forming.
A closing below the bullish candlestick pattern.

On the left side of the chart above, you can see that the 20 EMA just crossed over the 50 EMA.

Once this happens, we will constitute looking for our 1st ricoche.

After the EMAs crossed terminated, the market did recuperate equal to the EMAs initially, but the EMAs weren't respected.

It went higher up the EMAs, came back behind, went back up again, past came back off again.

We do not consider this a bounce.

And then at this point, we lul want to look for our 1st bounce.

Several bars later, we have our 1st bounce.

Later the 1st bounce, the market very quickly dropped down in unity big candle holder bar.

And then information technology went back up again to the 50 EMA.

The market started to booth at the 50 EMA and then it formed a Pessimistic Pin Prevention.

This was our signal to sire ready to go Short once the market closes down the stairs the low of that Bearish Pin Bar.

Notwithstandin, the incoming few bars saw the commercialise somewhat consolidating and not really making any move.

Last, the market went lower and information technology closed below the low of the Pessimistic Pin Bar.

That is our trigger to go Brusk at the nearby of that bar.

Then we place our Stop Loss above the high of the previous golf sho high.

Some traders like to place their Stop Loss directly above the Pessimistic Pin Bar.

That is a live Block off Loss area too, just it's very unerect to Stop Loss hunt.

Because that's the obvious put away that people would blank space their Stop Loss.

Many times, the market testament get you into the swop, only to go back to hit your Turn back Loss which was very patently placed to a higher place the high of the Bearish Pin Block u, and past go dorsum down again.

Therein case, information technology didn't, but there are some times where it bequeath.

Away placing your Occlusive Red above the previous swing high, it makes your Stop Loss harder to beat gain.

And it is a post where if the market gets there, chances are that your trade ISN't going to put to work unconscious anyways.

As for the Take Profit level, again either we place it at 1.5R or 2R.

If you're wondering why only 1.5R or 2R?

The answer is because we have placed our Stop Loss pretty far inaccurate at the previous swing high.

That means our Stop Loss length is bad wide.

So the market May not necessarily go rattling farthest descending from where we placed our 1.5R or 2R Postulate Profit level.

However, if you had set your Stoppage Loss above the high of the Pessimistic Oarlock Legal profession, then you about likely can go for 3R and probably more because your Stop Loss is tight.

The trade-off is that you will draw stopped out more oft compared to where I place my Stop Loss, just you can get bigger wins each time you Take Profit.

Ultimately, it all comes down to your trading style and psychology.

Get along you like to get stopped out often but bring home the bacon big wins each time?

Or do you choose to come through more oft just not get smaller wins each time?

At that place's no right or wrong response.

As long as you are bankable at the end of the sidereal day with a positive expectancy arrangement, and then that's all that matters.

The Hidden Divergence EMA Trading Strategy

Right away, what if you send away't always find a trade that bounces off the 50 EMA?

Does that mean you can't get into a pullback trade?

Definitely not.

That's where this strategy comes in.

So for the deficiency of a better name, I've known as this the Hidden Difference EMA Trading Strategy.

I know, I know…

The 50 EMA Bounce Trading Scheme also utilizes the hidden discrepancy.

But it has strict criteria whereby the market has to bounce off the 50 EMA.

For this EMA trading scheme, the setup is much easier to happen.

And the beauty of this trading strategy is that there's no need to identify candlestick patterns.

Many traders start out confused with the different candlestick patterns and miss their entries.

With this scheme, the swop entry criteria are more objective than subjective.

Information technology's also very similar to the 50 EMA bounce strategy where we bequeath be using the random indicator to identify hidden divergence.

The only difference is that we do not look at bounces off the 50 EMA, or any EMA for that matter.

Instead, we look for higher highs and higher lows in an uptrend, and lower lows and lower highs in a downtrend.

Long Entry Criteria

The selfsame first matter we look for to get into a Long-term trade is that the 20 EMA essential be above the 50 EMA.

One time we have that, we look for the following:

The securities industry to make higher highs and higher lows.
Wait for the market to close to a lower place the 50 EMA.
Bank check the stochastic indicator for hidden divergence.
Wait for the market to close above the 20 EMA.
Go Long and position Stop Personnel casualty on a lower floor the swing low.

In the chart higher up, the first thing to notice is that the 20 EMA was initially below the 50 EMA, only and then it crossed to a higher place the 50 EMA.

So we are only looking for a Long switch once the 20 EMA has crossed above the 50 EMA.

On the left-hand broadside, you can see that the market moved from below the 50 EMA to above it and started to form higher highs and higher lows.

At the first high low-pitched, we tooshie see that although the market did go up some aloofness from that level, that was not a valid entry for America because the stochastic indicator is not showing a divergence.

So when thither's no trade signal, we sit on our hands with patience and wait for the next one.

As the market started to move higher, it formed a higher screaky and a second higher low.

At that point, what we want to look into out for is for the market to enveloping below the 50 EMA.

When the market did close below the 50 EMA, the random indicator was also showing a hidden disagreement.

The next pace is to wait for the market to close in a higher place the 20 EMA.

Once it closes above the 20 EMA, plump Nightlong and place a Stop Loss either below the current swing low, OR the previous swing underslung, depending on how far aside it is.

If the former swing low is quite a distance aside, then I would place the Stop Loss below the current swing low.

Short-change Entry Criteria

Instantly that we be intimate what the Drawn-out entry criteria is, the Short entry criteria is simply the opposite.

So here's what you want to look for in a Truncate entranceway:

The market to make lower lows and lower highs.
Wait for the market to close above the 50 EMA.
Check the stochastic index number for hidden difference.
Wait for the market to close below the 20 EMA.
Go Short and place Turn back Loss above the swing high.

In this chart, you keister ascertain that right aft the 20 EMA crosses below the 50 EMA, the first let down high is formed.

Unlike in the Long entry exercise, there is a hidden divergence instantly formed at the first lower high.

The market then closed to a higher place the 50 EMA, and later came chicken out to close beneath the 20 EMA.

This is our Shortened entry signal.

Once the candlestick below the 20 EMA closes, that is our Short entrance.

Place Stop Red ink above the rife swing high.

Take profit is at 1.5R or 2R.

So there you go…

These are the two EMA trading strategies to trade pullbacks.

Pick Just One Trading Strategy

What I've presented to you here are two of the strategies I've been using for a years to trade pullbacks.

But at that place are many another different trading strategies taboo there that trade pullbacks as substantially.

Even just using EMAs, traders can go up with a concourse of EMA trading strategies.

Is there ONE best strategy to use?

No more.

But at that place is the best strategy that is suited for you.

Ultimately, it comes bolt down to how cozy you are with trading the strategy.

And whether you give the sentence and patience to trade the finical scheme.

Once you've found a trading scheme that you're comfortable with, test it out before putting every your aliveness savings into it.

Constitute a smart trader.

And make sure the trading scheme actually gives you an edge trading the markets.

One to a greater extent thing…

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