In the attempt to average out market fluctuations, traders are constantly inventing new strategies based on moving averages. In this article, we’ll look at one of such strategies that uses EMA and fractals.
To see the EMA strategy in action, let’s take a M15 chart on GBP/USD.
- Currency pair: GBP/USD
- Timeframe: М15
- Indicators: EMA(34, High), EMA (34, Close), EMA (34, Low), EMA (12, Close), Fractals
The good thing is that the strategy only involves standard indicators that can be found in any trading platform. As for the strategy rules, they are easy to understand even for a rookie trader.
How to use the EMA strategy
You need to go long if EMA (12, Close) crosses all three EMA(34) lines upwards. Wait till a new candle opens and then enter the market.
A stop loss is set at the nearest fractal below the EMA(34) channel. A take profit must equal to a stop loss. Alternatively, you can use a trailing stop or close a trade once the opposite fractal occurs.
For a short trade, the opposite entry conditions apply. You need to open a short position when EMA(12, Close) crosses all three EMA(34) indicators downwards. Here again, you need to wait for a new candle before making an entry.
Avoid opening a position if EMA(12, Close) is moving along the EMA(34) channel for a long time, or if EMA(12, Close) fails to cross all the EMA(34) lines (i.e. leaves the channel soon after entering it).