Developing a trading strategy is a crucial task in the pursuit of success. You can design your own strategy that will be based on your skills and needs. However, it might be a bit overwhelming at the beginning and so you can also apply ready systems. Today, I am going to present a simple EMA strategy with a quite high win rate. You can use it in Forex trading mode on the Olymp Trade platform.
Key Takeaways🔑
| →The EMA strategy with a high win rate is based on the Exponential Moving Average indicator and can be used in Forex trading on the Olymp Trade platform. |
| →By using two EMAs (50-period and 20-period), traders can identify potential entry points based on crossovers and pullbacks. |
| →It is important to test and adjust the strategy according to individual preferences and risk management principles. |
Contents
A simple rule-based EMA strategy
You are about to learn a simple strategy that is based on the Exponential Moving Average indicator. In fact, you are going to need two of the EMAs. But first, prepare the chart.
Chart preparations
Log in to your Olymp Trade trading account. You should think well through what kind of asset you are going to use, the amount of money you are going to invest and also the risk management. Set the type of the chart and its period to 1 hour, and then go to the indicators icon.
Find the Exponential Moving Average. It comes with default settings however, you will need to change them. You are going to use two EMAs, so you might wish to differentiate them by choosing the distinct colours for each. The period of the first EMA should be set at 50 and the second at 20.
Trading with the EMA based strategy on the Olymp Trade platform
In order to enter the trade, you must wait for some conditions to occur.
The first thing is to look at the Exponential Moving Average with the period of 20 and wait when it crosses the EMA with the period of 50.
Then, you should look for the first pullback to the EMA20 that happens after the crossover of the EMAs.
Entering a long trade
You can look for opportunities to go long when the EMA20 crosses the EMA50 from below and moves above it.
Then wait for the price to pull back to the EMA20. Enter when the price bar touches the indicator’s line. Above you will find such a situation on the EURUSD chart. On the hourly time frame the fast moving average crosses the slow average upwards (1). The price then goes up and starts to fall. We buy when the price touches the EMA20 (2). The target level for this trade is the price of the previous peak (green rectangle). If after the entry the price goes in the other direction, we should close the trade when the price makes a counter move equal to our target (red rectangle).
This will result in a Reward to Risk ratio of 1:1. However, I am not saying this is the only option. You should check different scenarios and see what works best for you.
Opening a short position
Take a look at the GBPUSD chart below. To open a short position the EMA20 should cross below the EMA50 (1) and continue below it. Enter when the price pulls back to the EMA20 and touches its line (2).
Target lowest point of the price before the pullback to place the take profit.
Use a 1:1 risk-reward ratio to place a mental stop loss for this trade.
Pros and Cons of the EMA Strategy with High Win Rate 📊
Pros:
- Simple and easy-to-understand strategy. 📈
- Based on the widely used Exponential Moving Average indicator. 💪
- Offers high win rate potential when used in Forex trading. 🎯
Cons:
- Requires consistent monitoring of EMAs and price movements. 🧐
- Results may vary depending on market conditions and individual trading preferences. ⏱️
- Profit potential should be balanced with appropriate risk management techniques. 🔄
EMA Strategy with High Win Rate: Step-by-Step Guide 📈
| Step | Description |
|---|---|
| Step 1 | Log in to your Olymp Trade trading account and select the desired asset. |
| Step 2 | Set up the chart with a 1-hour timeframe and add two Exponential Moving Averages (EMAs): 50-period EMA and 20-period EMA. |
| Step 3 | Wait for the crossover of the 20-period EMA above the 50-period EMA to indicate a potential long trade setup. |
| Step 4 | Look for a pullback to the 20-period EMA as an entry point for a long trade. |
| Step 5 | Enter the trade when the price touches the 20-period EMA and consider setting a target level for profit-taking. |
| Step 6 | For short trades, wait for the 20-period EMA to cross below the 50-period EMA and follow similar entry and exit rules. |
Conclusion
The strategy described in today’s article is pretty simple and can be used by anyone. Yet, it has proved its efficiency. You must be consistent in following the strategy and have good risk management prepared.
The rules are pretty straightforward. Add two EMAs to the chart. One with the period of 50 and the other with the period of 20. Wait for their crossover and then for the pullback to the EMA20.
I was using the 1:1 risk-reward ratio but you should test various options to maximise the profits you may get.
Use the Olymp Trade demo account where you can practice trading with this simple EMA based strategy. Check how it performs, make notes of the results you have received and introduce necessary adjustments. Take your time to do it as you do not risk money trading in the demo account. Naturally, you would gain nothing either so switch to the live account once you are ready.
Be consistent!
Frequently Asked Questions (FAQs) about the EMA Strategy with High Win Rate ❓
- Q: What is the EMA strategy with a high win rate?
A: The EMA strategy with a high win rate is a rule-based trading approach that utilizes Exponential Moving Averages to identify potential entry and exit points with a focus on achieving a high success rate. - Q: What are the recommended EMA periods for this strategy?
A: This strategy suggests using a 50-period EMA and a 20-period EMA for identifying crossovers and pullbacks. - Q: Can the EMA strategy be used in other timeframes?
A: While this guide focuses on the 1-hour timeframe, the EMA strategy can be applied to other timeframes based on individual trading preferences. - Q: Is risk management important when using this strategy?
A: Yes, implementing appropriate risk management techniques, such as setting stop-loss levels and considering reward-to-risk ratios, is crucial for overall trading success.