Time frames: 1 hour and IS minutes.
Instruments: Although it was initially designed to operate in the Forex market, can be used in practically any market
thanks to its simplicity. For Forex traders, the system can be applied in any time frame, although you have to consider
the fact that some pairs like EUR / JPY or GBP / JPY are more volatile and EMAS can take longer more in reacting to
changes in price than with other currency pairs.
Indicators: Three exponential moving averages with the following settings:
System entry rules
Buy signal: Open a buy position when the 10-period EMA crosses up the 2S-period EMA and subsequently crosses the
so-period EMA also in a bullish direction.
Sell signal: Open a sell position when the 10-period EMA crosses down the 2S-period EMA and subsequently crosses the
so-period EMA also in a bearish direction.
* Note: To avoid false trading signals, especially in highly volatile instruments, it is recommended to wait for the current
candle to close above the so-period EMA (buy signal) or below the so-period EMA (signal to buy). comes out).
We can actually apply two criteria to close a position with this system:
Criterion 1: We close the position when the 10-period EMA crosses the 25-period EMA in the opposite direction to the
Criterion 2: We close the position the moment the 10-period EMA touches the so-period EMA.
In this case my recommendation is to use criterion 1 since the benefits obtained are better protected.
Stop loss: As for the stop loss, there is no rule about it. However, I would like to use a stop placed about 10 pips below
the 2S-period EMA (buy position) or above the 25-period EMA (sell position). Depending on the risk tolerance of each
account, it should be possible to implement tighter or wider stop losses.
Due to its simplicity it can be applied in practically any foreign exchange market. Gold and oil can be tested, but I
consider it risky.
Like any moving average strategy, it produces many false signals in sideways trending markets. For this reason, I would
like to use it in combination with indicators that allow confirming the strength and direction of the trend, such as the ADX
(Average Directional Index) by Welles Wilder.