Complex trading system #4 (Trend trading with EMAs)

Hi Edward,
Thanks for the reply for the previous post.

So meaning, if I were to enter a sell trade ( when the signal is a sell generated by the 4 EMAs and RSI), I do not need to wait for the 4 EMAs, to cross below 80 EMA (in an uptrend)?

Regards,
Raymond

That is correct, Raymond

you don't need 4 EMAs to close below 80 EMA, all you need is price trading below 80 EMA at that moment.

(If price is above 80 EMA while 4 EMAs signal to go Short, then you wait till price drops below 80 EMA, and providing that old crosses from 4 MAs are still valid, you enter a trade on the close of a signaling candle - a candle that crosses and closes below 80 EMA).

Regards,
Edward

Hi Edward,
Thanks for the reply. There is one more thing, which I would like to ask.

At the point of EMAs crosses for a buy/sell entry, (RSI MUST be above 50 (for a buy), and below 50 (for a sell), and entry at the next candle which open above/below after 80 EMA. Right?

Or can the EMAs cross first, then the RSI show the signal after the price open above/below after 80 EMA?

I'm sorry to ask on this as, I'm new to trading.

The sequence at which signals arrive doesn't matter in this case.
As soon as all indicators say "good to go" you can enter.
If, for example, MAs crossed, but RSI failed to confirm it at that moment, you can wait, and as soon as RSI signals OK, you enter a trade. Same for 80 EMA etc.

Regards,
Edward

Hi Edward,
I appreciated this strategy and is one of my favorites, but I have noticed a contradiction to strategy #2 ("2-Cross"), in the sense that here you say that we can enter when the bar price closes above or below the 80 ema (with all other signal are ok) while in the strategy #2 you say not to get in position if the price is less than 25 pips from the 100 SMA but often when the bar closes beyond the 80 EMA is less than 25 pips from the 100 SMA, what should we do? also I'm using this strategy with daily time frame and I would like to use a pair of EMA (not SMA I do not like them) as a support or resistance which advise me? Thank you from now also for everything you do. Luigi.

I'm sorry I forgot to tell you that another contradiction is that in the Strategy 2-cross you say that we can enter short also when the price is above the 100 SMA and vice versa, here not. Best regards. Luigi.

Hi Luigi,

thank you for your questions.
In the current strategy we have 2 sets of Moving averages (13 & 21) and (3 & 5), which allows to track trends precisely (combining short term and long term momentum) at any moment.
In "2-cross" strategy we have only 1 set (5 & 15 - short term momentum), which is less informative, therefore when price approaches 100 SMA, we'd rather stay aside if the distance is less than 25 pips (the distance is given for 3-4 hour TF only).
Why to be cautious around 100 and 200 SMA? Around those areas price tend to range more often, which is unfavorable for our short term moving averages as they will produce a large number of crossovers where many of them will be false.

with 2 sets of Moving averages you're less likely to get caught because you have more strict requirements - Moving averages have to line up.

Whether you choose EMA or SMA, your trading performance should remain within the same profitability range. EMA is faster, but SMA is smoother: sometimes you need speed, other times smoother transformation. There is no strong preference towards either Moving averages among traders, it is about 50x50.

Regarding taking trades against 100 SMA, it is possible, although you'll be trading against the trend. In "2-cross" strategy it is allowed when we combine MA signals with MACD. But, as you have correctly noticed, we have to be aware that we're trading against the trend.

Regards,
Edward

Thank you Edward for your answers always precise and punctual my thanks will never be enough. One last question, I am a "quite" trader and I use daily TF, I would like to ask what are the less volatile pairs, and if agreed to operate on cfd (especially with this strategy). Many thanks. Best Regards. Luigi.