D1 - 20 EMA & 50 EMA

D1 20 EMA & 50 EMA Trend Strategy

I'm currently BETA testing a new system which uses the 20 EMA and the 50 EMA on the D1 chart. The EA can be found at the bottom of this post along with all of the other indicators that I use including the MACD, Moving Averages, and my personalized template.

You don't need to worry about installing any of the files except for the "D1 20 EMA & 50 EMA" file. The other files are there in case you want to have the same chart template as me.

Installing EA Into MT4:

1. Download the file.
2. Shut down your MT4 terminal
3. Go to Expert folder
4. Copy the file into Expert folder.
5. Open MT4
6. Go to the Chart where you want to attach the EA
7. Click the Navigator
8. Browse Expert Advisors folder
9. You will find the file here
10. Double click the file to attach it with your Chart
11. Expert Advisor Property dialog box will appear.
12. Select "Long & Short" for positions
13. Tick (if not) Enable Alerts, Allow Live Trading, Allow Dll imports, Allow import of External Experts.
14. Enable Expert Advisors
15. Under the "Inputs" tab you will put in parameters including Lot Size, Take Profit, Stop Loss, Max Positions, and Delay Hours.

*Lot size is obviously going to be determined by risk tolerance, account size, max positions, and the amount of pairs being traded at any given time. We have recommended Stop Loss and Take Profit parameters as well as delay between each new position, but they really all depend on each trader's personal preference.

Currently testing this system on EUR/USD, EUR/JPY, CHF/JPY, USD/JPY, NZD/JPY, NZD/USD, AUD/JPY, AUD/USD, EUR/AUD, GBP/AUD, EUR/NZD, GBP/NZD, GBP/USD, GBP/JPY, EUR/CAD, USD/CAD, CAD/JPY, AUD/CAD, AUD/NZD, & EUR/GBP.


D1 - 20 EMA & 50 EMA Trend Strategy Rules & Parameters

1) Price needs to be above / below BOTH the 20 EMA and 50 EMA on the Daily chart. Above = BUY Below = SELL

2) New positions are opened up using H1 Williams % Indicator when price is Over Bought / Over Sold. We do not need to wait for H1 to close in OB or OS area. Once price moves into OB / OS area then 1 position opens up.

3) IF price moves in between the 20 EMA and the 50 EMA then NO positions should be opened until price breaks out above/below BOTH the 20 & 50 EMAs. If price is "stuck in between" the two EMA's then this tells us that market is probably ranging so it is best not to add any more positions.

4) NO opposing positions should be opened no matter what (no hedging same currency pair with buy and sell positions)

5) Time Delay in between new positions should be at least 6-12 hours apart. Different time delays between opening new positions are currently being tested on multiple currency pairs.

6) SL 250 & TP 350 (Recommended SL & TP Parameters)

7) Max Positions 8

IMPORTANT: I may look into disabling the EA after all 8 positions are opened per pair and wait until ALL stop losses or take profit targets are hit. Then I will wait to see if each pair is going to continue trending in the same direction or if we may see a potential reversal soon. This can be done by using Price Action at weekly areas of support / resistance.

By doing this it will make it so this strategy is not 100% automated but it should help to eliminate losses which could be avoided by being patient and using price action at support / resistance (PASR) using the weekly charts.

To learn more about PASR go here.



Example: EUR/AUD D1 & H1 Charts

*I forgot to mention that this system is 100% Technical and 100% Automated with NO human intervention*

It is also very similar to the Third Screen Strategy which is explained here. If you read through the thread you will see that I have experienced fantastic results for the past year and a half. Trade results for the past 1 1/2 years from this particular strategy trading 11 different pairs can be found here.

The Power of the 20 EMA and 50 EMA in Forex Trading

The 20 ema is used by most institutions, banks, funds and big boys as part of their trading. Some use it with the cross of another MA or MAs as a system. Many of the little guys (us) use the 20 ema in some form or other in our trading. Some professional traders use the price and 20 ema as their method by buying a close above the 20 ema and selling a close below the 20 ema (don’t try this at home, as they say, as the Professionals also use filters to avoid whipsaws and “false” moves).

To a certain extent, the use of the 20 ema becomes, like Fibonacci retracements, a self fulfilling prophecy.

Our use of the 20 ema is not as a trigger in any shape of form, but as one of the tools to help us in our decision making process. It should never be used in isolation and never be taken as “the last word”.

Think of the 20 ema as equilibrium, or the balance line which is the point at which buyers and sellers AGREE on price. Remember we are dealing with energy both of the market and its traders. Energy ALWAYS seeks balance through the path of least resistance. If you haven’t done already, you should study thousands of charts (daily and up) with the 20 ema and 50 ema moving averages on and note several things:

The slope of the averages The cross of the averages Price relative to the averages

You should also take note:

What the market is doing when the 20 ema is flat
What the market is doing when the slope is up AND how STEEP that slope is
What the market is doing when the slope is down AND how STEEP that slope is
What happens to price when the 20 ema acts as resistance
What happens to price when the 20 ema acts as support
How price reacts around the 20 ema
What happens when the 20 ema is broken
What happens to price when it crosses the 50 ema
What happens to price when, and after, it is trapped between the 20 ema and the 50 ema
What happens to price when it is stretched away from the 20 ema
Think of the 20 ema as a magnet which attracts price (equilibrium). Outside forces greater than the power of the magnet ( buyers or sellers) pull prices away from the magnet. As price pulls away from the magnet, it takes the 20 ema with it but at a slower and lagging rate. The price reaches a certain point beyond the 20 ema where the 20 ema invokes its elastic limit and pulls prices back in line.

If you take the time to study each pair going back as far as your data allows, you will find that there is, for each pair, a certain number of pips that price moves away from the 20 ema before the 20 ema pulls price back into line (equilibrium)

The slope of the 20 ema gives you a “rough” approximation of momentum – use this with my TLs and you have a very good Momentum system.

The slope of the 20 ema and the cross of the 20 ema above the 50 ema tells you which direction you should be trading in.

The 50 ema is not as powerful as the 20 ema but when price “uses” the 50 ema, take note.

As per our style of no spoon feeding, we have given you the pointers, now you do the work and prove the value of the 20 ema for yourself. Nothing works better than something you have proved for yourself AND therefore BELIEVE in.

Add the knowledge of the power of the 20 ema to our PASR and we have an edge over most traders. In case of any conflict, PASR rules over EVERYTHING.

ah 100pips !

where did you dissapear off to ? good to see you back with a new strategy !

Hey WhatFx!

I've been pretty busy these past couple of weeks but I had a friend code an EA following the rules above. Am going to test this for the next 6-12 months before coming to any conclusions.

Hope all is well with you!

pips can you do a backtest using the EA to see how any pair performed over the past year?

Hi 100 pips,

thank you for sharing your strategy.

One question so far, what about the MACD? Is it just a remaining from the third screen strategy you referred to?

aly365

I don't know if I have the time to back test 20 different pairs. The rules and parameters are above if you want to go ahead and back test this system feel free

Yea I just keep my charts the way they are as I am still trading my live accounts using the Third Screen Strategy explained in the other thread.

oh sorry! i meant backtest 1 pair! i will never be that demanding

Thanks, 100PipsADay for sharing your system again.

Please, could you help clarify if positions should be opened in 1hr when Wpr is overbought or oversold in Daily like the attached chart. In your backtest, is it still safe to open position when 1hr TF is oversold as per the attached chart scenario?

Thanks again for sharing.

Okoli

Here is another example of EUR/AUD using this system:


D1: Price is above BOTH the 20 EMA and the 50 EMA

H1: Using Williams % indicator we look to open our BUY positions once price hits "over sold" area.

**This test is using a 6 hour delay in between each new position. The other one is using a 12 hour delay in between each new position.

SL 250 & TP 350 for each position.

subscribing

Please, do you consider additional filter to identify when trend is about to change. I monitored EURNZD last night when 1Hr wpr was overbought as at the close of the yesterday's bar and price was below both emas 50 and 20 in Daily TF. I found out now that price is currently trading above the daily emas 50 and 20.

Should we consider price to be above/below ema50 and ema 20 in 1Hr Tf also before opening a position. This to me would have been the only measure to prevent a loss if any position was opened to sell EURNZD when 1hr wpr confirmed Overbought yesterday.......
Please, I would appreciate your response.

100 pips,

I'm still reading, learning and practicing.

Could you please let us know if you use the ATR (5) and how? You said you are using SL of 250 and TP of 350.

Thank you

aly365

I recommend that nobody follow this system until I have at least 6 months worth of forward testing then we can see which pairs work the best. If you are looking to follow a system that is proven and profitable then please go to my Third Screen Strategy thread. All details and parameters are explained in detail throughout the thread.

pips we believe in you. if you empty our bank accounts, then we at least have someone to blame

LOL

If you choose to use this system I recommend trading EUR/AUD, GBP/AUD, GBP/USD, and one of the JPY cross pairs such as AUD/JPY or EUR/JPY. These pairs tend to trend nicely

Hi 100pips,

I have a question, or in some way you cut losses? (If so, how?) Are you waiting until the price reaches the SL?

Thank you

MaTi23tbg

I have a hard SL and TP for each position. I will not move SL or TP targets EVER.