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.
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.
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.
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.
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