EMA Trend Trading
EMA Trend Trading

Getting Started

This trading strategy relies heavily on catching the trend. You may have success using this strategy on as low as the one hour chart or as high as the daily chart; however, I’ve had most success trading it on the four-hour chart. This strategy
consists of four indicators, which are:

  1. 5 Period Exponential Moving Average (closed)
  2. 15 Period Exponential Moving Average (closed)
  3. 50 Period Exponential Moving Average (closed)
  4. Stochastic indicator K=13 D=5 Smooth=5 (13,5,5) 80/20 Levels

Refer to the picture above to see how your chart should look

How to Trade

There are only two, yet very important rules to follow when
trading this strategy.

  1. The K% line on the stochastic indicator MUST be above the D% line when taking a BUY & the K% line MUST be below the D% line when taking a SELL. Refer to the picture above to see how your chart should look
  2. Both the 5 & 15 EMA MUST cross the 50 EMA going upwards to create a BUY signal OR downwards for a SELL
    signal.

Let’s take a look at some examples:

Stochastic Trend Trading
Stochastic Trend Trading

In this example, we can see the K% is above the D% (as shown by the bottom green arrow). We can also see the 5 & 15 EMAhave crossed the 50 EMA (as indicated by the upper green arrow). Once both the 5 & 15 EMA’s have crossed the 50 EMAgoing upwards, we would have taken a BUY.

Next example:

trend trading strategy
trend trading strategy

In this example, we can see the K% is below D% (as shown by the bottom red arrow). We can also see the 5 & 15 EMAhave crossed the 50 EMA (as indicated by the upper red arrow). Once both the 5 & 15 EMA’s have crossed the 50 EMA going
downwards we would have taken a SELL.

As you can see, in both of these examples, we would have caught the trend and made some major pips!

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