Very accurate support and resistence play

Hello,

Can this work on higher tf like 4hr/daily charts? cause I plotted them on gbpjpy and I didnt see any SR(not that much) and even tried with eurusd.

Also can you please tell us why specifically u picked 25,150,365 ema? they are applied to high/low/open/close?

I am not trying to bring in any negativity to this thread I am just asking my questions

Cant believe it, 43 hours since it started and it has already moved http://cdn.forexfactory.com/images/icons/icon2.gif

I guess that the trading discusion are is OK.

Why has this been moved? A lot of bad moving lately imo.

This is an interesting idea and should be kept in the busiest place.

Forexpreneur, let me explain something about this magical 365 EMA.

This number is meaningless. Maybe you should explain why 365 and not 381 or 297.

Second, the 365 EMA or any bigger EMA will be always an almost flat curve. It is more or less a line. When EMA starts to look like a round curve it means that the market is seriously trending and the EMA becomes meaningless because the candles are far away from it.

If your chart touches this EMA it means that the trend is over. In this case, put any line on you chart and you will see that from time to time it acts like a S/R or the prices bounce when they touch it.

Now, the big question. Can you tell us what to do when, for example, cable will touch again the 365 EMA of 1H chart the next days?

It's your right to think the 365 is meaningless but that in itself is not an argument. How is it meaningless? Have you watched what price does when it gets near it, especially on the 1h, the daily and the weekly?

As far as 381 and 297 I haven't seen any evidence that the markets resist those on a regular basis. Have you? As far as why the 365 works I don't know you tell me. Back test it. Test it live and show me that it isn't consistent. Why do market's naturally resist century marks? I don't know and I don't care, I just know the market naturally resists them and that is all I care about.

I highly doubt it will take days for price to come back to the 365 EMA on the 1 hour because price is very close to the 365 EMA on the daily (currently at 1.6544). Chances are quite high price will bounce back down and retest the 365 EMA on the 1 hour again. But one NEVER KNOWS if that is going to happen. But it will resist that area unless the news report tonight causes price to never touch it or blow past it. But I know this. If the UK report blows past it, it will retest it.

What will price do when it hits the 365 EMA on the 1H again? Resist. That is what these are about. Just like any resistence, do you know what it will do? Can you guess what price is going to do on any resistence? I can. RESIST. That's it.

You are looking for a holy grail. Understand, all you can do is putt odds in your favor. That's it. You NEVER KNOW if price is going to go up or down.

Also understand that price doesn't travel too far from all of these EMA's. That is why you use the different time frames.

As far as the 365 EMA not working when they are curved that is not a sound argument. You still have 2 other EMA's on all 5 charts for each currency pair. Price will retest them because price never goes up forever or down forever.

Also, I don't recall saying that every time price touches the 365 on any of the charts that the trend is over. I said it will resist it big time, especially when you get to the higher time frames.

I just feel as though you are looking for the holy grail my friend. It does not exist and I said that in the beginning of this thread. Support and resistence is just that. Support and resistence. Treat it as such and you will be much better off.

Thanks for the arguments, but show examples of them not working at all. Sorry but I know you just read the posts and rejected the ideas. Put them on any and all of the Majors you trade. Watch them. Watch them work. Then if you don't like what you see come back with specifis and I will try to adress them.

Yes. Those charts are part of the 5 I mention. I also checked the GBP/JPY and the EUR/USD and they are working just fine. I have to download a program to get a screengrabber. I was going to do that today but had some errands. I'll do it in the next couple of days and put up charts and show and explain it to you. Understand like any resistence price will sometimes go passed but will often close at or near that resistence area.

If price travels up and goes past an EMA usually within a candle or two it will come back and retest. But I looked at the ones you mention and on the GBP/JPY price is bouncing in between a narrowing band on the daily. That band is the 25 EMA and the 150 EMA. That is telling me that price is starting to consolodate which it did about 2 months ago. That lasted over 1 week last time with about a max of 300 PIP movement from high to low, getting worse by the end untill it broke below slightly and then retested.

Once again, I'll show you a chart and point things out.

As far as why I "picked" the 25,150 and 365 it's because I found them to be very accurate with all the majors and the 5 time frames I mentioned. When combined with the 5 time frames I found it to be extremely accurate to let me know why price seemed to just stop in the middle of "nowhere" often and then quite often reverse. I really found them by accident.

And by no means do I take your post as negative. You can argue with me if you like. That is how we learn. If we never had any challenge we wouldn't learn and grow. Another gentleman argued a couple of posts above, but he didn't give any reasons why. If he showed me charts where price kept going past the EMA's and not retesting that would have been different.

I hope the answers helped. As far as the GBP/JPY and the EUR/USD can you give a screen shot of how you didn't think they worked? Also let me know what broker you used because some brokers get really different price feeds. I've worked with these on MetaTrader and my GFT charts (Global Forex Trading (the broker I use)). I found there to be very slight differences but only by a couple of PIPs. However price was reacting to the EMA's the same and each candle ending very close to the same.

I'm not looking for a holy grail using EMAs. Actually, I wasn't able to devise any long term succesfull strategy using them so I use another approach which seem to work.

Because you opened this topic I think you should explain why did you choose this EMA. From observing something to profiting is a long way in forex. You trade a pattern, nothing else, but you should somehow prove that this pattern provides more winnings than losses, otherwise is not better than random trading.

The prices will meet their averages, that's a mathematical fact discovered long before the people started to trade. That's why they will meet any imaginable SMA or EMA, sooner or later, not because some "professionals" look at them.

There are hundreds on this forum who think that SMA 200 is used by "professionals". Others use fibonnaci numbers like 89 or 55. 62 or 144 are also very hot. You came to 25, 150 and 365. You have a lot to explain, if you think that they are better.

First off I mention in the very first post it is PART of a system but an important part. Support and resistence is a very large part of trading is it not?

Once again I ask, have you tested these 3 EMA's yourself? Cable is currently resisting at the 1.6540 area with a high of 1.6543. Why is it resisting there? Could be many reasons. But oh wait. Look for yourself. There is a 365 EMA right at 1.6544 on the daily chart. Coincidence? Maybe. But how many times does a "coincidence" have to occur before it is something that needs to be paid attention?

A couple of posts earlier (3 posts above to be exact, and look at the 3rd paragraph), did I not mention that price would really soon resist at the 1.6544 area because that is where the 365 EMA on the daily was? It's there for everyone to see.

Here is a current chart of current price of the cable. The chart is the daily chart and the blue line is the 365 EMA. Now MetaTrader has the 365 EMA at 1.6555 whereas my GFT chart the 365 EMA is calculated at 1.6544. The descripentacy has to be because GFT opens up earlier the first trading day then MetaTrader. The current prices are the same but like any trading platform there will be differences with different brokers because of open/close.



So back to the whole argument of how these EMA's don't work. So far I called a resistence area before it happened and posted it before it happened. I believe that makes the score

You: 0
Me: 1



Am I wrong?

And to clairfy. There is no way to tell WHEN price is going to hit a resistence level. I can just tell you price will resist at these areas. Once again to further clarify, if there is a major news report (NFP, interest rate decisions, etc) price will often ignore most every rule in the book. However resistence is resistence. If price plows through at some point in the near future it is going to retest. That being said, I still have yet to see a report blow past the 365 EMA on the hourly or the daily when it approaches. Doesn't mean it will never happen, it's just that the 365 on the higher time frames is big time resistence.

So you say I "have a lot to prove". First off explain in detail how I can give a pile of information to "prove" this? Secondly, this is free information.

Test it for yourself real time. Back test it. But post charts that "prove" this doesn't work so I and everyone else can see.

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?

Hey, Sauron. Not wishing to speak for Forexpreneur but I think he means to profit by treating the 365 as resistance (on the daily). Back around August 3rd - 5th, price actually did soundly reject that level.

Just my quick 2pips on this subject of using MAs as s/r. I use horizontal s/r levels almost exclusively and, like many of us, I treat these levels as "zones" rather than hard edges. It may be visually helpful for some to add MAs above and below the main MA to form a narrow channel or "zone". In the following example, I added a 360 and a 370 to form a nice buffer around the 365.

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

http://img259.imageshack.us/img259/4025/forexproma.gif

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

thanx again for sharing.

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

http://img690.imageshack.us/img690/4025/forexproma.gif

short term result

http://img4.imageshack.us/img4/4025/forexproma.gif

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.

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 http://cdn.forexfactory.com/images/icons/icon10.gif lets see if the candle closes below it.

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.

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.

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.

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.

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.