EMA Rejection/Bounce strategy looking very positive with testing!. - Happy to share ideas or start a group with others

Trading Systems
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Main idea of this strategy is to trade in TRENDING markets trying to get into the trend.

The key for this Strategy is the market!

At the moment i have not found any indicator that can help me find the best trends, so any suggestions would be great I am just looking myself and judging this

But what I use is 200EMA 50EMA and 20EMA to but price must be below them all (if selling) and fanning with a nice slope, ideally it would of already had one touch in that direction to prove this is a trend.

also you can mark up clear Support and resistance at a higher timeframe to see where price can be heading and to know when to not trade!

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As you can see in the picture its a clear downtrend EMAā€™s separated nicely.

Look for price to reject the EMA so look for a wick or price going above and then back below or nice candle engulfing, but clear PRICE ACTION etc over a previous at either the 20EMA or 50EMA. I do like to normally see a wick as it shows clear rejection.

also if its in consolidation in a trend and it breaks out of this along side a bounce this is a great signal!

What i also like to do is use a higher timeframe to make sure it is aligned with the timeframe I am on so for example if I am using the 15 min chart i would check the 1 hour to make sure both trends are heading in the way i want to trade.

I have tested this and overall it seems very positive as long as it is used at the right time! but I was hoping if there is anyone that likes this idea to help me, we can test different timeframes etc

To trigger a trade i would put the sell limit a pip below to see if this is triggered but again this can be tested and adapted, so far this has stopped a couple of losing trades though that went in the wrong direction.

I have been putting a stop behind the trigger candle but this can also be ATR and aiming for 2:1 risk although alot of winning trades do continue to ride trends for longer so this is something that can be added onto winners with wins well over 4 risk!

I have added some pictures from tradingview, would love to hear peoples views, or anyone that would like to get on board, we can start a group and let each other know on signals etc!
Message either way.
Thanks

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Another good trade could of been had today on Oil using this method (not that i would trade today with the election) but just to show how it works.

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Hi, how many years of historical data have you used for backtesting? Regards Greg

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Hi, thanks very much for your message, its hard to say ive tried different timeframes and pairsā€¦

ive tried to do at the moment around 40/50 trades each time and its always positive aslong as its within the right market! so depending on what timeframe its gone back a good few years

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Another good example here from this morning! once again this is just on the 15 minute, i think the higher timeframes could even be more rewarding with better signals and more confirmed candles.

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Thereā€™s nothing wring with this approach but probably we could find about ten or 12 different TA approaches which would all give similar signals at similar prices. So keep doing what youā€™re doing but donā€™t be dazzled by its brilliance.

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I couldnā€™t agree more thereā€™s probably thousands of strategies that try to get with the trend and ones like this that have been adapted.

I can safely say I am far from ā€œDazzledā€ by itā€™s brilliance BUT Iā€™ve been reading, studying this for a while now and itā€™s given me my best results and letā€™s be honest this isnā€™t easy so Iā€™m encouraged by its positive results.

Iā€™d be very grateful seeings as youā€™ve taken the time to reply if you have more time to take a look for me and see if you have any tweaks or suggestions on this strategy that could maybe improve it?

I believe it still needs lots of tweeks and testing etc but thatā€™s why Iā€™m here.

Thanks
S

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The level at which to take profits is always the hardest question. A simplistic approach is just to set a TP ahead of price by say 2x the SL distance, so your r:r is always 1:2. The higher the multiple, the lower the win rate and the lower the win rate the higher the losses. Your r:r seems to be different for each trade, so how are you setting your TP price?

In addition, there are the related questions of pyramiding and scaling out which you might want to consider and say a bit more about.

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I completely agree and thatā€™s one I struggle with now. I have been doing a risk reward of 2:1 and some of them trades I posted would of been taken at 1.

I did try on some once 2 is hit to then put the stop behind to see if it would continue, Iā€™m not sure what is the best way with this? As I think you could have some big winners if you can stay in as long as possible.

I havenā€™t looked into scaling or pyramiding yet is this worthwhile?

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I use almost identical system but with 8EMA 20SMA and 50 SMA.
Mostly I trade DAX on 5min and 1min
8EMA and 20SMA cross overs are good.
I think that if you are using 5min then when 1min 8EMA starts to bend toward 20SMA it can be a good exit. Iā€™m not a big fan of pull backs so much, as they can turn in to reversals. Pull backs going back into trend can be a good trend confirmation. I personally tend to favour exiting when pulling back and re enter on confirmation.
I look upon this system as being MACD without MACD.
It tells you everything MACD without the distraction of having to look down at MACD and you can concentrate on candles better.
I never use take profit if I can ride a trend. And the standard ATR can be very misleading, one big candle in the last 14 throws it out of kilter.
I think that you have a very good system.
I wish you all the best.

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11

Hi, thanks very much for replying, thatā€™s interesting you do something kind of similar! I did look at crossovers when I first tried to learn about Forex so my knowledge was quite poor and stopped as I realised you get lots of fake opportunities, how do you stop this from happening in your system?

Iā€™ve been looking at it on the 15min chart but think it works on all timeframes, so do you think using an 8 would benefit me in terms of when to exit a trade or potential set ups coming for my method if it crosses??

I do agree with the atr as I tried this for stop kosses but if you get one big candle it can really throw this out.

Anything else you think could help? And how successful have you been with your strategy you seem to confident with it?

Thanks
Shaun

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Hi Shaun
I havenā€™t done much today, but had a couple of thoughts.
Yes this system works on all time frames but as I have just mentioned on another thread I prefer 1min and 5min.
A point that I have pondered is why bother with the 50SMA ? It does give some confirmation of trend direction and often acts as a resistance/support also gives some confluence of other time frames but something Al Brooks recommends is ā€˜concentrate on one time frameā€™. I know most traders would disagree but we are dealing with micro trends on theses small time frames. What can be a lovely 1/2 hour down trend on the 1 minute chart can be a mere short pullback on the 1 hour upward trend. So I ask does it really matter what is happening on the bigger time frames ? Sometimes I think we over complicate things.
A long time ago (well 10yrs) I was big into Fibonacci Grid trading were you are looking for Fibonacci confluence on 4 or 5 time frames to scalp the 1 minute time frame OMG what a palaver.
I tend to agree with Al Brooks and you seem to have a handle on candle price action.
As Iā€™ve said I trade the DAX and if you have a look you will find that just after London open it gives some nice little tends on 5min and 1min. I think it perhaps helps to concentrate on one thing, Sometimes I will do Nasdaq.
Just practice what you are doing and what suits you.
In my humble opinion, you are as near to the Holy Grail as it gets ! :wink:

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Haha the holy grail! If onlyā€¦

So your advice on jumping on a trend, when do I get out??

I do agree with what youā€™re saying with one timeframe to a degree or can get very messy, I was looking at say an hour timeframe to see if it is the same but it should be as itā€™s only 4 candles on from the 15 I guess.

The 50ema I trade as it does seem to bounce of this quite regularly and if it passes this itā€™s a good indication the trend could well be over.

Iā€™ve also tried the fib and all sorts and did go to just using price action but the market always seems to react slightly differently to how youā€™re taught in order to catch you out I feel!

The 1 Min and 5 min are so fast, Iā€™m still trying my best to be as good as possible and for me to work out the risk with my stops Iā€™ll never be quick enough on the 1/5 haha

I think I just need that little tweek that stops me getting in too many times

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Hi @Shaungliddon,

I came up with something similar a few months ago. I used a 20MA along with the Ich. Cloud. You can check it out here if you want. I never went much further with it as I already had a couple of different strategies on the go. But you never know, it might give you some ideas.

Good luck!

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Charts in multiple time-frames are unnecessary if youā€™re using MAā€™s with multiple periods. You still need a primary time-frame from which you derive your SL level and therefore your TP or pyramid or SL adjustment to b/e level.

Most traders are told by most trainers to use multiple time-frames and most traders lose moneyā€¦

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Thank you, I had a look, how did you find it.?

Did you test it in all conditions? I have and it obviously is terrible when itā€™s not trendingā€¦

I make sure all 3 EMAS are fanning and it seems to work well.

Did you adapt any newer strategies using something like this?

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Yeah I agree it makes me think instead of the 200 I should work out what it should be for a higher timeframe trend then itā€™s just on one chart, although 200 probably does the job!

Thatā€™s exactly what I think, most ppl fail at this so I need to think differently to most. It needs be simple and sensible.

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When to get out ? - You can wait until the 8EMA crosses back or when the candles are getting away from the 8EMA and the next candle starts to come back say 1/3 cos the 8EMA works like a magnet. If you are on the 5min you can use the 1min to help judge.
The more you practice it starts to become a bit instinctive really. Donā€™t be so worried about leaving some pips on the table. Itā€™s a pretty mechanical system but nothing is absolute.

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Yeah I always find it hard knowing where to take profit! Hardest part of it is say, Iā€™ve never used the 8ema so I will try this with my strategy and see how it works.

Maybe Iā€™ll move down to the 5 from the 15 and see how itā€™s moving. Iā€™m definitely not scared to leave some in thereā€™s if anything I leave too much on my winners as they hot a take profit and thatā€™s it

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I have forgotten the name of the famous trader who said -
" I trade trends - You can have the first 20% and the last 20%, I will have the 60% in the middle "

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