Good day fellow pips lovers, kinda new out here and also new to forex trading.
while find out what works for me as regards using Exponential moving averages, i discovered that the usual 14 and 26 EMAs for swing traders like me on a D1 or 4Hr time frame is slower in predicting an entry and exit signal for me.
i tried reduce the EMA figures to 8, and 15 and it kinda showed me my entry and exit signals on time other than the usual i was taught.
wanted to know if theres a down side to this using these figures even though i know that theres no Holy grail at all.
It wont work. Back test it, forward test it, change your stop loss, change your take profit, increase your position size, reduce your position size. It wont work. Crossover ema strategy is too basic. Sorry.
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Also known as “curve fitting”.
Will work perfectly for the period under review. Will fall over the next. And you’ll be repeating this cycle until your capital is but a memory.
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Wow! thanks a ton. so what do you suggest as the use of moving averages. i mean aside the crossover strategy.
thanks!
I think if u comfortable with MA crossover at daily TF, u should try trade commodities and equities
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The EMA’s that you mention can be useful for indicating the start of a trend on the 4H and Daily charts and as well as a new, shorter term move on a 1H chart. I.e. they are competent indicators that something significant is starting in the direction of the shorter period MA.
But using them as a crossover entry/exit trading method will not work consistently, as already mentioned above. If you think about it, in today’s computer technology, it is clear that systems have tested this for just about every combination of every type of MA type with every combination of periods you can imagination - and it does not work, and there are reasons why it doesn’t.
MAs are calculated using a mathematical formula such that the latest value of the MA is only incrementally changed by the latest price value according to the formula. But trends tend to end far more rapidly than when they are gradually getting going. Therefore by the time your crossover method which got you into the move has reacted to the price reversal at the end of the trend, your profit has all but vanished - and often even more.
Another reason why they do not work over time is because, in order to gain a profit, there has to be a sufficiently large move between where they cross for entry and where they cross for exit. This means they will do well in a long trend but will whipsaw with a string of losses during ranging ,directionless markets. And markets tend to trend only about 20% of the time. Therefore any good single trade from a trend will soon be returned to the market from the string of whipsaws that often follow it - and , of course, we never know at the start of a move whether it will develop into a long trend or not (but probably not!)
I have used EMAs for part of my entry method for many years, with certain rules, and I have always found it to be reliable - but one needs something else for the exit part of one’s strategy.
MAs can be used for crossovers and they can also be used as a trend indicator simply from the direction of a longer term MA such as 50 EMA . Many people (including me) watch the 200 SMA on various timeframes, mainly as S/R levels or even for entry/exit zones. There is no special reason why these should be significant apart from the fact that many people watch them! These kinds of widely-observed levels tend to have an, albeit short term, impact because they tend to concentrate a lot of orders around them which otherwise would be more spread out…
Just some thoughts…
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Thanks! but i thought all securities move randomly?
Retail spot FOREX is the one that moves randomly my friend. Not Equities and Commodities. Trust me. I trade them for a living. Daily.
Thanks a ton Brov! What a informnation.