triple exponential moving average trading strategy

A triple moving average trading strategy is well known and fairly common. It is a simple slue chase strategy that is stubborn founded on the moving averages that are organism ill-used. A three-fold itinerant average trading method acting involves exploitation a rattling long term Mummy, a average term MA and a short-stalked term AM. The moving averages can be exponential or dolabrate, depending on a trader's preferences. As for values, the general combinations are 200, 100, 50 operating theatre 100, 50, 20 or 10 depending on the timeframe.

Of course, there is none specific normal on the values (periods) of the moving average, and IT is up to the trader to decide what values to use.

Discernment the triple moving average system

A triple aflare average trading system is based remove buying the dips in an uptrend or marketing the rallies in a downtrend. Trends are determined as follows:

Weeklong term Mom is above medium term Old Colony = Uptrend
Hence, buy the dips or retracements when the short full term MA signals a optimistic crossover.
Long terminus MA is downstairs mass medium condition Mom = Downtrend
Hence, sell the rallies or retracements when the short term Mommy signals a bearish crossover.

The above rules are very simple to understand and as for the ba loss and take profit levels, it is up to the trader to decide how they want to place their levels. It could be a trailing stop or a fixed RR set up.

On that point are many articles and tutorials (and even Ea's) that overlay this rather simple approach to trading. But here are much unique ways you can pick up on potential buy and sell signals. For the balance of this article, we will apply 100, 50 and 10 EMA's.

Triple EMA: The 10 – 100 Crossing over

Long or short circuit signals are generated when 10 and 100 EMA's interact. However, this is not a betoken to immediately move into the trade. A perfect 10/100 crossover buy signal occurs when all three EMA's are previously pessimistic (or bullish in vitrine of a sell). And so, the 10 EMA makes a bullish crossing on the 100 EMA (simply the 50 EMA is still below 100).

Depend to the chart below which illustrates a false sell signaling and a perfect buy signalize.

10/100 Crossover: Difference between correct and false signals — 10/100 Crossing: Difference between correct and false signals

Now that you have got identified a perfect (buy) signal, the next step is to plat the highs and lows of the candela which triggered the 10/100 crossover. Past, wait for the 50/100 (bullish) crossing and wait for price to breakout or adjacent above the range high that you get selected.

Go for a 1:1, 1:2 and 1:3 RR set ups and move your hold on losings accordingly.

Triple EMA – Buy signal — Multiple EMA – Buy in signal

There is a minute of flexibility that you canful admit for yourself. The next example shows a sell signal where we go off short before the 50/100 crossover. The reasoning behind this deal rig up is attributable the nature of the slope of the 50 and 100 EMA. If you had to waiting for the 50/100 crossover you would have missed an ingress (although in that location would have been other ways to deal out).

In the in a higher place example, we go light along the breakout from the candles' pasture low. At the time of entry there was to 50/100 crossover, merely the slope of the EMA's advisable that there would be pessimistic crossover. In this example however, the trade would have reached T1, T2 but T3 would have been stopped out near T1. Placid, the effect offered a selfsame good RR.

Not all pose ups are created equally

The trick in trading this method is to allow yourself sufficiency chart time to be familiar for this pattern to exhaust. Non all congeal ups work out on the dot the way as defined. The first chart below shows an example. Here after we set the range on the 10/100 crossover EMA, price takes a while before triggering a point. Naturally you could have entered provident on the breakout from the first level, or you could have waited for the second retracement. Regardless of the trade entry, notice both the trades moved in your favor.

Flexibility in trading this method — Tractableness in trading this method

And in some instances, the trade is not triggered at all. The close chart under shows a short signal that quickly reached up to T3 while the longitudinal signal did non trigger the put away up.

Triple EMA: Long trade failed to trigger — Triple EMA: Long trade failed to spark off

A outlined in the above examples, this alone way to trade wind the triplex EMA offers an objective way to trade with a controlled lay on the line/reward set up.

Wherefore does this establish work?

If you have asked yourself this question, chances are that you are thinking on the moral track. This trade down up function because of momentum. When 10EMA cuts across (50 EMA first and) 100 EMA, it signals solid momentum in price. Thus, supported the dips operating theater rallies that occur ulterior, the trade can personify entered safely in the direction of the momentum.

In the next article we will explore another way to trade the Triple EMA trading strategy. Until then…. Practice, practice, practice!