The 3 Step EMA Strategy for Forex Trends.
by Walker England.
EMA’s are weighted averages used in trending markets. Find the trend with a 200 period EMA. Time entries using a series of EMA’s utilizing smaller periods.
When it comes to trending markets , traders have many options in regards to strategy. Today we will review EMA’s and how they can be used to create a complete strategy for Forex trends.
Let’s get started!
Today’s strategy will revolve around the use of a series of EMA’s (Exponential Moving Average). These averages work the same as a traditional SMA ( Simple Moving Average ) by directly displaying an average of price for a selected period on the graph. However, the EMAs calculation incorporates a weight to put a greater emphasis on most recent price. This weight is placed to remove some of the lag found with a traditional SMA. This makes the EMA a perfect candidate for trend trading.
Now that you are familiarized with EMA’s let’s look at their uses in a trend trading plan.
Before we enter into a trend based position, we need to know exactly which way that trend is heading. Below we have the GBPCAD on a 4Hour Chart. We can see the pair is making new highs while establishing higher lows , which makes the GBPCAD a strong candidate for an uptrend . This analysis can be confirmed by the use of a 200 EMA . Traditionally traders are bullish when price is above the 200 EMA and bearish if price resides under the average .
Given the information above , traders should look to buy the GBPCAD .
Learn Forex – GBPCAD 4Hour Trend & 200EMA.
(Chart created by Walker England)
Timing Market Entries.
Once market direction is identified, we can th en use a series of EMA’s to enter the market. Below we can see that a 12 and 26 period EMA have been added to the graph. Since we are only looking to buy in an uptrend, it is important to identify areas where momentum is turning back in the direction of the trend . EMA’s can help us decipher this by identifying an area where our shorter period moving average crosses above the longer period EMA. At this point t raders can look to buy the market.
Below you will find several sample buy entries using EMA’s on the GBPCAD . Remember, this process can be re plicated for a downtrend by selling in the event that the 12 period EMA crosses below the 26.
Learn Forex – GBPCAD 4Hour Entries.
(Chart created by Walker England)
Now that a trade has been opened, traders need to identify when it is time to exit the market. This is the third and final step in developing a successful strategy! Traders may choose a variety of stop/limit and risk reward combinations here to suit their trading needs. However, if you are already using a series of EMA’s they can be incorporated into your market exit. If we are buying on a return to bullish momentum, traders should close positions when momentum subsides. This can be found in an uptrend when price moves back and touches the 12 period EMA.
Stops should also be placed when trading with the trend. One simple methodology is to place stops under a swing high or low on the graph. This way in the event that the trend turns, any positions can be exited for a loss as quickly as possible. The graphic below will show an example of both scenarios.
Learn Forex – GBPCAD EMA Exits.
---Written by Walker England, Trading Instructor.
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Features of the EMA (Exponential Moving Average) on Forex.
Moving average not only allows to smooth the price charts, but also simplifies for traders the opportunity to enter or leave the market on time, which is very important while trading on the volatile market. To increase the delay, which is normal for simple moving average, traders on the currency market often use exponential moving average (EMA).
Exponential Moving Average Indicator.
The problem of the EMA is that it delivers double signals, i. e. repeatedly reacts on one price change. First time – when the new signal is received, second – when this value is being deleted from the calculation of the average. It changes, when the new price value appears.
in the terminal Settings of the EMA indicator.
So, unlike to simple average, EMA is able to react on the price change only once, in the process of its receiving. Due to this fact, exponential average is considered to be more preferable for usage in the procees of trading on Forex. The reason for this is the fact, that this average provides greater importance to new data and less to the old information, thanks to this it can react on current price changes faster as well as not to be that dependent from the old price changes. Wherein, it’s possible to achieve more quality smoothing.
It’s recommended to use exponential average as the most reliable nowadays out of all similar ones. It cuts the delay due to the fact that the biggest significance is given to the last prices. Also it should be taken into consideration that the importance, given to the last price, fully depends on the length of EMA period. The fact, that the weight, which is given for last price, fully depend on the length of the EMA period.
It’s recommended to use exponential average as the most reliable nowadays out of all similar ones.
Such moving averages are defined via summing of certain part of the real closing price to the last value. As a result, in case of the shorter period of the EMA, bigger importance will be given to the last price. This will give the opportunity to the curve to show on the price chart almost real price changes of the currency pairs.
This property allows the exponential moving average to have better quality relatively simple moving average. At the same time, this fact can be considered as the disadvantage of the EMA, because due to the fast reaction, it is more inclined to the perception of the wrong signals.
On the real chart the difference between these two moving averages is not so considerable, but it is clearly seen. Many experienced traders say, that EMA reflects the price situation on the market more plausible, because the previous price influence decreases exponentially in the process of its moving from the current price.
How to Use EMA.
MA is used in many trading strategies and is applied in many technical indicators. Wherein, the profitability of this strategy directly depends on the period, which is used for the moving for one or another time period. The most elementary is considered to be the way of calculation of the best period, taking in consideration the average period of holding the position relatively to the tempo of trading.
Also, you should understand, regardless of the correctness of the calculation of the optimal period of MA using, while testing, you always have the right to correct it to get the most true and real information.
Don’t forget about the fact that MA will always follow the available trend, but very often can give signals with the delay. Regarding the use of such averages the flat is not always effective. The use of the moving average gives an opportunity to correctly define the market situation only in the case of presence of all the corresponding conditions.
by JustForex , 2017.08.26.
Margin trading on the Forex market is speculative and carries out a high level of risk, including full loss of deposit. You must understand this and decide by yourself whether this type of trading fits you, considering the level of knowledge in a financial area, trading experience, financial capabilities and other factors.

EMA Indicator Explained – What is an Exponential Moving Average?
The “Exponential Moving Average”, or “EMA”, indicator was developed to counter the lagging weakness of the SMA indicator by weighting more recent prices more heavily. Its origins are unknown, but its use was designed to smooth out the effects of price volatility and create a clearer picture of changing price trends. Traders use an EMA, sometimes in concert with another EMA for a different period, to signal confirmation of a change in price behavior.
The EMA indicator uses “period” and “price”, as does the SMA, but fresher prices are given more weight to make the indicator respond more quickly to market changes. Since it reacts more quickly, it is prone to generate more false signals. The EMA works well in tandem with another EMA in strong trending markets, but the use of an EMA in a sideways market is not recommended. Since the EMA is so popular, it can often form a support or resistance line, depending on the type of trend, that traders respect in their decision-making process.
EMA Formula.
The EMA indicator is common on Metatrader4 trading software. The calculation formula is more complex than for a an SMA and follows these steps:
Choose a “price” setting – assume “closing price”; Choose a “period” setting – assume “10” for example; Calculate the “Smoothing Factor” = “SF” = 2/(1 + “10”); New EMA value = SF X New Price + (1- SF) X Previous EMA value.
Software programs perform the necessary computational work. Two EMA lines are presented below calculated using two different periods ( Red = 28, Blue = 13 ):
Software platforms generally place the EMA indicators along side the existing candlestick formations as depicted in the diagram. The EMA “Red” line with a longer period setting follows the upward trend, lagging below and forming an angled support line until the trend begins to reverse its direction. The “Blue” EMA line, with period setting 13, reacts more quickly and is embedded inside the candlesticks.
The benefit of the EMA indicator is its visual simplicity. Traders can quickly assess the prevailing trend of price behavior from the direction of the EMA. Care must be taken since the EMA is a lagging indicator and may not adjust rapidly to volatility in the market.
The next article in this series on the EMA indicator will discuss how this indicator is used in forex trading and how to read the various graphical signals that are generated.
Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

Ema forex indicator

Moving Averages (MAs) are among most commonly used indicators in Forex. They are easy to set and easy to interpret.
Speaking simple, moving averages simply measure the average move of the price during a given time period.
It smooths out the price data, allowing to see market trends and tendencies.
How to use Moving Averages.
Moving Average is a trend indicator.
Besides its obvious simple function a Moving Average has much more to tell:
In Forex moving average is used to determine:
1. Price direction - up, down or sideways.
2. Price location - trading bias: above Moving average - buy, below Moving average - sell.
3. Price momentum - the angle of the Moving average: rising angle - momentum holds, falling angle - momentum pauses or stops.
4. Price support/resistance levels.
Types of Moving Averages.
EMA - Exponential Moving average - gives priority to most recent data, thus reacts to price changes quicker than Simple Moving Average.
WMA - Weighted Moving Average - puts emphasis on most recent data an less - on older data.
Most common settings for Moving Averages in Forex.
20 EMA and 20 SMA.
10 EMA and 10 SMA.
Try and test and then choose your favorite set of Moving Averages.
Moving Average Video Presentation.
Other versions of Moving Averages.
Besides traditional EMA, SMA and WMA indicators, there are several other types of MAs available to Forex traders:
trader.
Wawan Hartanto.
Hi, saya Wawan Hartanto dari Indonesia. Saya hanya ingin mengatakan bahwa penjelasan anda sangat mudah dipahami, sangat bermanfaat bagi siapa saja terutama bagi mereka yang masih awam terhadap indikator Forex. Terima kasih.
Hi, I Wawan Hartanto of Indonesia. I just wanted to say that your explanation is very easy to understand, very helpful for everyone especially for those who still lay on the Forex indicators. Thank you.
great work, thank you.
Good video, thanks.
Can you tell me how can I download the different Moving Averages (weighed, exponential, triangular) so I can add them to my MT4 platform? The platform is ok but does only have a simple moving average.
can you please help me by providing a dowloadable WEIGHED MOVING AVERAGE INDICATOR?
JOHN newbie in Forex.
FxIndicators.
Weighted and Exponential Moving averages are available in every MT4 platform by default.
All you have to do is change the MA method in the properties window.
FxIndicators.
Triangular Moving average can be downloaded here: TMA. mq4.
How to download indicators from this site.
FxIndicators.
Thanks a lot for your generosity and sharing your knowledge with people. What goes around comes around. So wish you all the best and success in your fantastic career.
How about the Displaced Moving Averages indicator?
FxIndicators.
Displaced Moving Average (DMA) is your regular Moving average with only difference that it's been shifted in time (either backward or forward).
To make DMA we add the "Shift" value:
A negative value would mean a shift backward - so that your Moving average will stay behind the price N number of intervals. Such Displaced Moving average is able to contain the price in a trend better.
A positive value would cause a shift forward - such Displaced Moving average becomes a leading indicator, which to some extent helps to anticipate next moves.
I used 5ema, 10ema and 20ema. and when the 5ema cross above both 10and20ema. i enter Long and vise versa. please tell me is it ok. cos am new to forex trading. Awoooooooooooo.
FxIndicators.
It's certainly Ok. It's a well known technique in trading.
can anyone tell me what are the best proven moving average based on your experience.
FxIndicators.
Depends what you want from it.
Faster trends - 20 SMA, mid trends - 50 SMA, longer trends - 100 or 200 SMA.
If you want to use the Moving average not just for finding trends, but to actually give you quick buy/sell signals, then you'll need a smaller MA - 10 EMA is one that's used the most.
Hi, i'm jeffryloo your explanation is very easy to understand. I give you 5 start.
Like you I use the 50,100, & 200 MAs but, make the 100 exponential. The 50 provides great trend info and all three provide excellent dynamic support/resistance. I know this may sound crazy but, for me the best short term average is a channel made of the 8 Smoothed MA high and the 8 Smoothed MA low. This provides excellent trend direction and helps alert you to sideways movement and assist in determining breakout. This also provide superior dynamic support/resistance. Obviously, this does not rely on a cross but, more on price action relative to the channel which is very powerful when combined with a couple of indicators such as RSI & ATR. I make them each a different color just to make it easy to spot the high and low of the channel. Thank you for providing indicators and explanations hard to find anywhere else. You have helped me more than you can imagine.
Can the management tell m or anyone with proficient forex trading experience , what are the best either EMA or SMA and numbers for trading the 15 minute charts with a long term 6/8 hours up to 12 hours outlook market direction ?
Plus if you could also explain better please precisely what is meant by the above herein blog post regarding the screen shot of the Displacement Moving Average ( DMS ) settings mean ?. ie: Is it number relevant to the time frame chart one trades on and those respective number of candle sticks +3 forward in the market ( ahead of the current market price ) and or respective negative -3 number of candle sticks behind the current market price ?? Many thanks John.
FxIndicators.
if you want a smoother MA - SMA would be better.
If you need s faster MA - take EMA.
Smoothing out helps to avoid some false spikes, but it also delays entry and exit signals.
While with EMA you'll have much faster response to price changes, but it will come at an increased rate of false signals. That's the difference. All depends on one's trading system, where both EMA and SMA can be used effectively for trading on 15 min TF.
-10 Shift for the Moving average simply shifts the indicator X number of bars on the chart for the current time frame:
"minus ten" would mean that the shift is 10 bars behind, "plus 10" would shift it 10 bars forward.
Thanks for your great job!
Hi. I have just a quick question. Is it possible to negatively displace a given Moving Average; and still have the line (MA) show on the current candle rather than lag behind the number of displaced candles/value. I don't think this is possible on MT4, if so is there a separate indicator that can do just this?