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Attachments: How to use the 9/20 EMA setup effectively
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How to use the 9/20 EMA setup effectively

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  • Have you used the 9/20 ema setup before ? If yes, how do you find it ?
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  • Post #1
  • Quote
  • First Post: Edited Apr 26, 2010 2:39am May 31, 2008 7:06pm | Edited Apr 26, 2010 2:39am
The 9/20 EMA setup has been a popular setup for a long time and it still works. However like all setups, they have their hits and misses. I have used them for a long time with good success.

The setup originated from Mike Bruns as mentioned by a forumer, and credit goes to him for such a powerful setup.

Here I shall attempt to list out all possible considerations in order to minimize the drawbacks. Under individual posts, I will list out the considerations as orderly as possible.

Coupled with very recent chart examples, I hope to create a sharing and learning platform towards the use of this setup.

The pairs discussed here will be EUR/USD, USD/CHF, USD/JPY with an intraday perspective.


Regards,

mt
  • Post #2
  • Quote
  • Edited 7:48pm May 31, 2008 7:24pm | Edited 7:48pm
For people not familiar with the 9/20 EMA setup, here is a brief introduction to the method in its purest form. Later you will see how this setup is very useful when combined with commonsense trading strategies.

Plot a 9 and 20 period EMA on your chart. ( I prefer 5 min or 15 min charts ).

Long entry :

the 9 EMA must be above the 20 EMA, wait for a bar to pull back and close between the 9 EMA and 20 EMA. Place a long order 1 or 2 pips above the highest high of the bar that closed under the 9 EMA.

The opposite apply for going short. Below is a chart example.

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The benefits of using the 9/20 EMA setup includes :

-Trend determination.
-Help locate a re-enter point should you miss the first move.
-Help you stay with the trend, and not subject to pulling out on fake pullbacks.
-Help you get into a position earlier.

The following posts will be examples of how to use the effectively.

mt
We all know how when prices break previous day levels provide excellent profit potential.

Heres an example of how to reenter a previous day range breakout when you miss the initial break. The horizontal line is the high of the day before.

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Here how you can use it to get in a position early. When done correctly, even if the break fails you can get out with a few pips in the pocket. The horizontal line is yesterday high, and a crossover occured near yesterday high indicating a possibility of more upward movement to come.

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mt
The validity of the signals can be further enhanced by adding a 60 period SMA. On long entry, you would prefer the 60 SMA to sloping upwards and vice versa for short entry, although it is not an absolute must.

A picture says a thousand words. Heres two, one for long entry, the other for short entry.

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mt
Trendlines are one of the most simple and effective method of analyzing charts. There are some flexibility in this.

Firstly, the obvious is to trade in the direction of the trend as indicated by the trendline.

Second application is on trendline breaks. As in the previous day range break, I find it useful for reentry when you miss the first move. However, the 9/20 EMA setup do not apply for early entry for trendline breaks.

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zoom in
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mt
The application of using the 9/20 EMA setup with triangle patterns is similar to that of trendlines. Take note, this setup can be used for reentry upon breakout, and not for getting in a position early.

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zoom in
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mt
I used this setup long time ago and still using it
and it's better when you use 30 WMA instead of the 20 EMA

and I know about it from a magazine essay by Mike Bruns
and fellow traders talked about it in the trading-naked.com
it's good when you refer to the source

and using it is better in 30M and bigger time frames

Good Luck
In daytrading, I seek to capture the meat of the movement within the 24 hr period. However within 24 hrs the movements can be rather limited. Below I explain how I determine if the signal is worth taking. It can be applied to most other trading methods on top the the 9/20 EMA setup.

We have to see what range the particular pair had achieved during the tokyo session as well as the london session. Assuming pair X averages 100 pips a day and it has already met this range during the first half of the london session, then a breakout of a channel on the upside for example would not yield very good odds if this breakout occurs at the upper extreme of the previously establish range. If the scenario is such that pair X only managed 50 pips prior to NY start, then the same breakout would be meaningful.


mt
Quoting benssol
I used this setup long time ago and still using it
and it's better when you use 30 WMA instead of the 20 EMA

and I know about it from a magazine essay by Mike Bruns
and fellow traders talked about it in the trading-naked.com
it's good when you refer to the source

and using it is better in 30M and bigger time frames

Good Luck
Hi benssol,


How do you know he is copying it from Trading naked and not giving due credit. Also how do you know that trading naked is the primary source for this method.

I appreciate the fact that he took time to elaborate on this method.

Thanks
TradeStar
Haste not to Enter AND Haste not to Exit !-TradeStar
Quoting benssol
I used this setup long time ago and still using it
and it's better when you use 30 WMA instead of the 20 EMA

and I know about it from a magazine essay by Mike Bruns
and fellow traders talked about it in the trading-naked.com
it's good when you refer to the source

and using it is better in 30M and bigger time frames

Good Luck

Hi, glad to know someone who uses this too.

Yes, this setup existed for a long time already, and its has served me well since my first attempt couple of years ago. I had read about it in the website you mentioned too.

I don't use it exclusively though, here I am trying to document the many possibilities of using 9/20 EMA with other techniques, most importantly, to reduce the drawbacks.

It is not experimental, I am using them myself, hoping to share and improve it during my free time.

All da best to you too benssol.
Quoting TradeStar
Hi benssol,


How do you know he is copying it from Trading naked and not giving due credit. Also how do you know that trading naked is the primary source for this method.

I appreciate the fact that he took time to elaborate on this method.

Thanks
TradeStar
Hey
I'm not saying he copy it
I'm said I have been using this method from along time and when I saying that I must tell the source !

and my source wasnt the trading naked site, it was futurevision !
then I found them discussing it on trading naked

and when you talk about a method or setup dont tell it's an old method only
try also to tell the source

those ideas took a big amount of time and money and work to be created
so
it's fair at least to tell the name of the creator
Maybe I can clarify first, I never claim that the 9/20 EMA setup is that of my invention. as the thread title suggests, "How to use the 9/20 EMA setup effectively", I hope nobody interpret it as my invention, or else I would have posted it in the Trading System forum instead.

This setup is well known and has been used by many. With regards to the origin of the setup, my apologies if anybody feels that I am not giving credit to the "inventor".

I should change the thread title to "How to trade a moving average crossover effectively" as it applies to most values used in MA.


mt
Quoting benssol
Hey
I'm not saying he copy it
I'm said I have been using this method from along time and when I saying that I must tell the source !

and my source wasnt the trading naked site, it was futurevision !
then I found them discussing it on trading naked

and when you talk about a method or setup dont tell it's an old method only
try also to tell the source

those ideas took a big amount of time and money and work to be created
so
it's fair at least to tell the name of the creator

benssol,

Thanks for highlighting the origin of this setup, my bad as I do not know better.

mt
Quoting aiyahmarklah
Maybe I can clarify first, I never claim that the 9/20 EMA setup is that of my invention. as the thread title suggests, "How to use the 9/20 EMA setup effectively", I hope nobody interpret it as my invention, or else I would have posted it in the Trading System forum instead.

This setup is well known and has been used by many. With regards to the origin of the setup, my apologies if anybody feels that I am not giving credit to the "inventor".

I should change the thread title to "How to trade a moving average crossover effectively" as it applies to most values used in MA.


mt
nobody said that man
just misunderstanding between me and tradestar

and you told it in the first post
and I told the source

good luck with improvements
Quoting benssol
nobody said that man
just misunderstanding between me and tradestar

and you told it in the first post
and I told the source

good luck with improvements



Thank you and your contributions are much welcomed and appreciated.
Following posts #3, 4 ,5, 6 and 8 on the variations and considerations.

Lets see how those principles apply when the market open this coming week.

Cheers

mt
While waiting the action to start during this Asian trading session. Lets see how this setup worked last friday on the following pairs...

EUR/USD

Below we can see how the price quickly fell below the 60 sma followed by the 9/20 ema. Most would have missed the trade given the speed it moved. However as indicated by the arrow, the 9/20 ema provided ample reentry opportunity. The drop bottomed at previous day low and had a strong rebound looking like it is about to go back into the range. ( note : the short entry should have been covered once it got rejected at previous low indicating a lack of selling power ) The rebound was confirmed when the 9/20 ema crossed into a bullish bias. The long entry was further confirmed when it broke the 60 sma.
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Following the rebound, the price and the 9/20 ema stayed above the 60 sma throughout, indicating a bullish bias. Since then the 9/20 ema has provided at least 2 more long opportunites for the rest of the day.
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USD/JPY

The USD/JPY traded in a range of about 50+ pips the whole day. However, using the 60 sma as a guide and 9/20 ema for entry. Several opportunities presented themselves.
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I wish I can add more examples and I intend to do that also. Especially the different senarios descriped in earlier post. The ideal here is to use all recent examples and setups as I trade along and post them here. So do check back !! I usually trade the European session through to the first half of New York session.

Have a good trading week ahead

mt
Here we have the price and 9/20 ema trading under the 60 sma...with a bearish trend mid term, lets see if an early short is possible. Take note that this pair is still under very strong bullish long term trend.

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Those who are quick should be able to secure 5 to 10 pips already.

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USD/JPY seems to have developements too.
Take a look at USD/JPY...i missed it...waiting for a good chance to enter again since it broke previous day low.

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