Forex trading strategy #21 (Egudu EMA+ADX Strategy)
Submitted by Edward Revy on December 18, 2007 - 15:06.
The following Forex strategy was submitted by Egudu - our valued contributor. Thank you once again and let the market be always on your side!
Hi, this is Egudu, and i have this simple but efficient strategy and i hope you enjoy using it.
Currency: any
Time frame: 1hr
Indicators: 5EMA(close), 6EMA(open), [ADX(14) at 20mark]
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Pls how about using EMA 20 and 40 both applied to close, to identify trend in the 1hr chart.
Sure, it would be helpful.
Regards,
Edward
Dear Edward, thanx for this highly valued website. i am new in forex so i dont have a full bucket of knowledge yet but i am sure as i start to read your website i will fill my bucket compeletly. so my qaution is what is function of close Or open in EMA ? how close and open function effect EMA'S.
very very thanx in advance, jatin
Hi Jatin,
Moving averages simply smooth out data presented on the chart. Since price has High, Low, Open and Close values, there are 4 options/4 price values for MAs to be calculated upon. The most used price value is "Close", because it represents the final result/agreement between buyers and sellers at any given time.
Other options (price High, Low and Open) are used by traders in their trading experiments in order to find the best representation for price activity seen on Forex charts.
The ultimate goal for any trading system is to find such set of tools, which will help you to see and read price moves successfully.
In current strategy the factor that one EMA is based on Open and another on Close helps to pull two moving averages further apart, so they do not provide unnecessary crosses for the strategy which entries rely on EMA's crosses.
Regards,
Edward
Dear Egudu,
I would like to know more about the entry rules.
When the 2 moving averages have crossed over according the rules mentioned and the ADX is above 20 BUT is bending down (ie in a downtrend) and doesn't look to be going up but still > 20, does the ADX in this situation still be considered as having satisfied of being over 20?
Should I only consider the ADX to be good enough only when it is > 20 AND trending up?
Please let me know. Your reply would be very much appreciated. Thank you.
Tom
Malaysia
I have the same concern as Tom's.
Now, my only idea is to look at -DI and +DI lines of ADX. A buy signal occurs when +DI crosses above -DI and a sell signal when +DI moves below -DI.
Then combining it with ADX over 20 I get an idea of both: direction and strength of a trend. Also when ADX gets to 40 and begins to decline that is the case of an ending trend.
Thomas
Hi
just wondering if you should wait for the candle to close or 1 pip difference is enough?
cheers
john
Hi John,
Waiting for a candle to close is advised.
1 pip difference becomes an alert, while closed candle is a trigger to enter.
Regards,
Edward
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