[azlan1]

thanx for sharing this precious infos.
i compared the MAs with pivot points, and guess what?
on my workframe, the H1 - they turned out to be very accurate indeed.
365 EMA = Daily S1
150 EMA = Weekly Pivot
25 EMA = Floater



a bit off topic, i also found out that 250 SMA = Daily Pivot on H1.

thanx again for sharing.

[azlan1]

resistance on M30.
look at the MAs, they are having their reunion party at the weekly pivot i think.



short term result

[Forexpreneur]

Originally Posted by Sauron

For me it is not clear what you mean by "these EMAs work".
Let me put it differently.
The current price of cable is very close to EMA 365 on the daily chart. How can I profit from this situation?

Good question Sauron and I will explain. Bear with me as I will take this from the ground level and expand upon it. Do not take anything I write as being demeaning or negative. This answer is not only for you but to help out others.

Let's look at the 365 EMA on the Daily chart for the Cable (GBP/USD for the newbies). Now the chart I am posting is from MetaTrader. As I mentioned before MT's charts the EMA slightly different than my GFT charts. I believe this is due to the fact that GFT's trading week starts 2 hours earlier. I find my GFT charts to be very accurate, but the MT4 charts are close enough and work out just fine. So here is the MT4 chart



This chart is current as I write this.

To help everyone to navigate this chart here is the following if you look from the right of the chart since that is the current hourly candle. There are 3 lines. These lines are the 3 EMA's I use (25,150,365). The top line which is blue is the 365 EMA. The second line which is purple is the 25 EMA. The third line which is green is the 150 EMA.

Once again, starting from the right, since this is the most current candle, start working your way to the left untill you see price run up. You will notice how price went through the 2 EMAs and then went through the blue EMA (the 365). The next candle price immediately retested and went back down past the EMA but at the end of the day price closed above. However the next candle price went above a little bit, retested the 365 EMA and there was a big selloff causing a very long red candle. The next candle is a text book perfect high wave candle which is a clear sign of market indecision. Then price went up over the next couple of days (remember each candle is one day since this is the daily chart) untill price resisted the 365 EMA. Went down then came back up retested, rejected and is headed down again.

So the pure way to play this is as follows. Support and resistance. At this point in time the 365 EMA on the Daily chart is still resistance. The way to maximize profits is to enter at support and resistence. This is where it gets tricky because you can play by using only support and resistence but a good system uses a couple of things to confirm or deny entry. If you have 2 or more things telling you to go in the same direction that is a called a confluence of events.

So in this case the 365 EMA is still resistence. You confirm it is resistence because when price went above the 365 price went back down past it when it was retested. If price went above, retested and stayed above it is then support. Since support has not been confirmed the Daily 365 EMA is still resistence. You would short it for now.

Now to not confuse things, lets just use tpure support and resistence as an example of how you would trade it. When price came back down to the EMA you would want to short at that point.

Where do you put your stop loss? That is where there are many different opinions, however no matter what, you want your profit target to be at least twice of what your stop loss is or you don't have a good trade. You would figure this out ahead of time. I would put the stop loss a few pips above the high of the candle immediately before. Now this is a daily chart so obviously I don't mean literally a few pips, more like 20 pips. Now since we are talking purely using the EMA's as support and resistance you could use your next EMA as a profit target which right around the 1.6265 area.

That is keeping it pure to the EMA's. However like I mentioned all along, these EMA's are only PART of my system. So with my system I would have 2 profit target areas if I was trading purely with the daily chart. The first profit target would be the bottom of the body of the immediate candle, risking to the bottom of the wick depending on price action. I would at least take a third of my profit at that area, but if it took a couple of days and the last day was a small candle I would take at least half the profit. At that point I would readjust my stop "loss" to around the middle of the candle immediately preceeding it. I would still have great proft for the trade. However the second profit target would be the second EMA (the purple line which is the 25 EMA). At that point I would take most of the other profit and maybe risk a couple of lots to see if price broke that EMA.

So I know that is a long answer but that is the best way to answer it. Now I will make the answer longer because what do you do for the next EMA? I know you will probably ask that Sauron so here we go.

In this case, look at the chart above to refresh yourself. Price went above the purple line (the 25 EMA) a little while back and never really retested. This happens from time to time so this is a great example of how to deal with this. At this point, the 25 EMA is an unkown. I say this because price never retested it to confirm if it was support or resistance. So at this point it needs to reveal itself.

As price comes back down you will have to be patient and watch. However, I have been discussing only the daily chart because that is what I posted, and that was the question. But let's continue with the daily only to help clear this. Since the 25 EMA is unkown at this point. We have to wait for confirmation. Price either has to bounce off of it and truly go back towards the 365 EMA, or price breaks through going down. If price breaks through going down it will most likely retest. If it retests and can't break through again going up then it is most likely a resistence area again.

Like with any support and resistence you want at least two retests showing either support or resistence, but depending on the situation I really like to see 3. However this is why no one ever has the same results because we all have different risk needs, or limits. It just depends if you are really aggresive or very conservative in your approach. Only you know that.

I hope this post helps to clear things up a little and I hope I answered your question Sauron.

Everyone feel free to ask questions, and feel free to challenge me. If you challenge me all I ask is you bring meat to the table. Post a chart if you can, or give specifics. Saying "this doesn't work", or "this is the lamest thing I've ever heard" really isn't challenging it.

These posts are not for my ego, these posts are to give people a very serious tool in their tool box for trading. Support and resistence is a very big part of trading and if you can figure out accurately where it is going to be, the better of your trading will be.

[Ezzy]

25 EMA offering nice resistance on the cable 1hr chart, broke it when it was support and now retesting it as resistance. Very nice indeed lets see if the candle closes below it.

[Sauron]

Thanks for your answer, you trade as I supposed, tipically support and resistance.
Now, I would like your opinion regarding this chart. I use the same configuration as you do, EMA 365 is blue, EMA 150 is pink, EMA 25 is black. Do you see the same support and resistance and very good trading opportunities?

[Forexpreneur]

Originally Posted by Sauron

Thanks for your answer, you trade as I supposed, tipically support and resistance.
Now, I would like your opinion regarding this chart. I use the same configuration as you do, EMA 365 is blue, EMA 150 is pink, EMA 25 is black. Do you see the same support and resistance and very good trading opportunities?

Hello again Sauron. I am taking this chart blind and frankly I love it because it is a good test of things. First off don't rely on one chart for your currency pair be sure to use all 5 (1 week; daily; 4 hour; 1 hour; and 15 minute). Since I can not see those I will take the chart you show.

The last candle is going down however there is a decent rejection. This could be because of a couple of reasons. Look at the other 4 charts. Are there any EMA's that price is rejecting on the other 4 charts? If not there is another possibility of what's going on. It's getting a little more advanced and is part of my overall system. By not being able to see the other 4 charts and only looking at this one, price could be rejecting the start of the previous move up (you tell this by looking to the left where price made a run up. The bottom of the candle is a resistance area, and sometimes it is where the body begins. This is more advanced but falls under the guidelines of "price action" which is another big topic).

Anyway, my educated guess is this is not quite a good area to get in at by looking at this one chart alone. Without seeing the other 4 charts and narrowing down what is happening (there could be EMA's on the other 4 charts that are causing resistance, and that is why I use the 5 charts), I am seeing that price will probably go back up and retest the 25 EMA (the black line). Of course that may not happen and it depends on if there are other EMA's on the other 4 charts that caused a resistence at that area.

So looking at this chart alone I wouldn't think of it as a strong entry point. I'll clairfy that more. Price will sometimes follow the 25 EMA on any chart, but normally does it on the lower time frames (15 minute usually, but sometimes with the 1 hour). When price went up very recently, there was resistance but price did go just above and then went down. If you look further to the left price broke above the 25 EMA more than once, but not much, but price continued down following the 25 EMA.

Price is certainly in a downtrend but a little moderately. Now this is getting even more advanced but applies to these EMA's directly. Remember I don't use the crosses of the EMA's as an entry, however the 3 EMA's on the lower time frames (usually the 15 minute and 1 hour) will give a clue as far as trend. If you have all 3 EMA's already crossed and all 3 are going up or down, that is a strong trend. The higher the time frame the stonger the trend. So if you see all 3 EMA's going in one direction on a higher time frame like the daily, you are in a very strong trend that direction.

That is more advanced, but that is how they work.

So to sum up your question from this chart alone if I wasn't in a trade yet, I personally would not enter right here. I would look at the other 4 charts to give me a better idea of what caused the rejection and then go from there. I feel price will retest the 25 EMA on this particular chart again real soon. I don't expect price to break the EMA and reverse, but anything is possible. From the recent past experience I am guessing that price will retest the 25 EMA, not break too much and continue slowly down untill there is some heavy resistence on another chart, especially a 365 EMA. Remember though, NFP is coming up and that will cause some heavy action most likely.

I know that once again this is a long answer but I want to try to explain it in detail to help you and others understand how to use it.

[Sauron]

It is great that you've made such an analysis but this chart is randomly generated.
I wanted to show you that you will see exactly the same behaviour with your EMA's on a random chart. Look again how the 365 EMA was support and then resistance on a double top. You couldn't say that the chart is not real.

Mathematically I know that the higher the EMA the more it will act as S/R. It is not a coincidence, it is normal. Therefore it is very difficult to find a strategy around it because I can't decide between market behaviour and the laws of numbers.

In the end I wanted to know if there are other reasons why this particulary EMA is important.

[Forexpreneur]

Originally Posted by Sauron

It is great that you've made such an analysis but this chart is randomly generated.
I wanted to show you that you will see exactly the same behaviour with your EMA's on a random chart. Look again how the 365 EMA was support and then resistance on a double top. You couldn't say that the chart is not real.

Mathematically I know that the higher the EMA the more it will act as S/R. It is not a coincidence, it is normal. Therefore it is very difficult to find a strategy around it because I can't decide between market behaviour and the laws of...

That's great and all, but I'm not sure why you are so intent on trying to prove these don't work? A "randomly" generated chart is great and all but it really doesn't prove anything.

Go back to my original post. This is PART of a system, but the point of just focusing on the EMA's is to try and keep it simple. They are resistance lines and I think you are getting very confused by that. You treat resistance the same no matter what caused it.

These EMA's on the 5 time frames I mention act very accurately as RESISTANCE! You can trade from resistance, and is the best entry for a trade if you know how to trade resistance. Anyone can google "trading resistance" or go to the library and read books on it.

So let me ask, why are you so against these EMA's? It seems kind of odd to me. Your posting of a "randomly" generated chart really does not prove a thing. Once again real time price action with these EMA's is proof in itself. Show charts where price completely ignores these EMA's on a repeat basis over time than we have somthing to discuss. Untill then you are looking very suspicious.

Also looking at all of your posts you've made including mine, you are always trying to put down people's ideas and trying to discredit them. You obviously are not out to help anyone or share any real ideas, only out to try and discredit people. I find that very interesting.

[Sauron]

I'm not against EMA's, I can't be against some mathematical function.
I want to find out if they really work and I ask the traders if they can devise some strategy around them which works for all pairs on the long run. I have a system which works without them and maybe if I see some proof about their behaviour I can use them as a filter for some bad trades.

Regarding your last edit, I'm not one of those who will write "Great system, I'll give it a try" after every fancy idea. I wanted to understand if there's something else about this particulary EMA. Repeating that "it works" will not prove anything about it.

If you really want to help then show us your system. Simply saying that 3 EMA's and some century level "work" will not help.
They don't work because you discovered them, they maybe work if there's some better, fundamental reason.

[Forexpreneur]

Originally Posted by Sauron

I'm not against EMA's, I can't be against some mathematical function.
I want to find out if they really work and I ask the traders if they can devise some strategy around them which works for all pairs on the long run. I have a system which works without them and maybe if I see some proof about their behaviour I can use them as a filter for some bad trades.

Now you are getting the point of them. Nowhere did I suggest you trade these all the time as an entry signal. Read the original couple of posts. Once again it is PART of a system, but knowing where support and resistance comes up on a regular basis is incredibly important and beneficial.

Once again use all 5 time frames. There is a reason for it. They help to fine tune where support and resistance often occur.

Once again I have no problem with people challenging these but bring meat to the table. If you are not convinced these work than that's fine. To help other's, show why with REAL charts. Test it over time with actual real time price.

I didn't invent these. I found them. That's it. It's not like I developed and programed an indicator.

[scalpz]

Originally Posted by Forexpreneur

...
Let's look at the 365 EMA on the Daily chart for the Cable (GBP/USD for the newbies). Now the chart I am posting is from MetaTrader. As I mentioned before MT's charts the EMA slightly different than my GFT charts. I believe this is due to the fact that GFT's trading week starts 2 hours earlier. I find my GFT charts to be very accurate, but the MT4 charts are close enough and work out just fine. So here is the MT4 chart

Attachment 354817
This chart is current as I write this.

To help everyone to navigate this chart here is the following...

Hi Forexpreneur,
Have been trying to duplicate your MA's on my IBFX demo (server demo1). They have a 1 hour Sunday bar at the start of the week, but I didnt think it would effect the MA's to such an extent.
Attached is a screen shot of almost the same bars as yours at post 33 with same MA's as your 25, 150 & 365.
Considerable difference in the 365 EMA, I have to crank the 365 EMA up to 442 EMA to make it match. Also notice that the 25 EMA has some different curves. Are you sure yours is EMA not SMA.
Can you confirm they are all based on the closed price for the bars.

I will have a look at MT4 on my FXDD platform. They are GMT +3 (vers IBFX using GMT). My FXDD is so painfully slow now, it occassionally stalls the whole computer. But they have no Sunday bar and overall are 1 bar shorter than IBFX for the week.

Really like the S&R trading & bit of breakout trading. If the MA's can work as active S&R, then awesome. Like your way of reconfirming them as "its now support or now it is resistance". Not sure I can handle 5 time frames though, I was more thinking just the 3. But then you have a lot more time up then me & probably a lot more consistant success.
So watching & learning here.

Right off to close down some stray screens & tempt the FXDD platform.

cheers scalpz

[Forexpreneur]

Originally Posted by scalpz

Hi Forexpreneur,
Have been trying to duplicate your MA's on my IBFX demo (server demo1). They have a 1 hour Sunday bar at the start of the week, but I didnt think it would effect the MA's to such an extent.
Attached is a screen shot of almost the same bars as yours at post 33 with same MA's as your 25, 150 & 365.
Considerable difference in the 365 EMA, I have to crank the 365 EMA up to 442 EMA to make it match. Also notice that the 25 EMA has some different curves. Are you sure yours is EMA not SMA.
Can you confirm they are all based on the closed...

I love the fact that you are toying with the EMA's. That is a good thing and something every trader should do as markets do change. In this case you did it because you weren't getting a match, however you tweeked it untill you started to get a consistent match.

You hit the nail on the head of how this can be a very powerful thing. They are active and moving support and resistence lines. Isn't that what we are all looking for? Areas where we know there is likely to be resistance of support? That really is a big part of trading. Also having areas where you can expect a possible break out.

To answer your question I am absolutely positive they are EMA and not SMA or weighted, etc. Also the EMA is set for close of price. That is something I didn't even think about letting people know.

As far as Sundays, GFT opens 2 pm PST, however it also closes at 12 pm PST on Friday. This will make a difference over time if your broker opens or closes at different times than GFT. Like I mentioned before there is a slight difference on the MT4 charts however it isn't much and doesn't take away the accuracey.

Hopefully that makes sense.

[Ezzy]

Hi Forexpreneur

Are you considering or would you consider sharing your system with us?

Cheers
Ezzy

[Forexpreneur]

Originally Posted by Ezzy

Hi Forexpreneur

Are you considering or would you consider sharing your system with us?

Cheers
Ezzy

Shure. I'll have to wait untill this weekend as I have some things I need to do tomorrow. It will have to be a couple of posts long as there are things to explain and some of it has to be in detail, but absolutely.

[Ezzy]

Originally Posted by Forexpreneur

Shure. I'll have to wait untill this weekend as I have some things I need to do tomorrow. It will have to be a couple of posts long as there are things to explain and some of it has to be in detail, but absolutely.

Hi Forexpreneur

Thanks for sharing what you have so far.

I am getting the impression that you like to be precise in what you communicate, so please take your time to communicate your system with us.

I believe that any system that considers price action and S&R as fundamental aspects of their system is very much worth learning.......and I have a sneaky suspicion that your system may include these.

I will read your earlier posts to start off with.
Thanks to Sauron also, he was able to ask some question which elicited more valuable information from you.

Cheers
Ezzy