Education

EMAs V.2

This article will enhance the definition and guidelines for using EMA in the ARZ Trading System.

General Conditions and Significance:

Trend Direction: Price should pull back (at least once) and then resume making new highs/lows, with the candle body (uptrend/downtrend).
Trend Strength: the steepness of the EMA slope.
Ranging: If the EMA is flat or the price repeatedly crosses and closes without pullbacks, it indicates a range.

Each EMA's usage:

7EMA: Spike and Master Candle Identification. Spike: a trending market based on 7EMA. Once the price is crossed and closed 7EMA with a candle body, look to the left to find the Master Candle.
20EMA: Minor Structure. Always trade in the direction of minor trends unless it’s a minor range.
50EMA: Major Structure. Serves as a key level to indicate default buying or selling conditions: if the price is above, it suggests buying; if below, it suggests selling.
100EMA and 200EMA: Just as a key level for analyzing price.

Let's analyze this chart:

In candle #1, the price has crossed and closed and created a new high. So it is a pullback and we are in an upward Spike.
In candle, X price has crossed and closed below 7EMA, after giving at least one pullback to it. So we look to the left to find the MC (Master Candle) which is candle #2.
In candle #3, the price has crossed and closed below 20EMA, so if in the future the price can't break the 7EMA upward, it most likely will continue a downward Spike until reaching the LTP of the MC (which happened after giving pullback to 7EMA in candle #4). We expect this behaviour.
After breaking the LTP, although the candle is huge, it wasn't able to break the 50EMA (Exhaustion Candle). It is a sign of a possible reversal to the MC. Candle #6 is a Signal Bar (which will be covered in future) and confirms it.
In the circled area, we are in MC (Ranging Market) and this type of behaviour is normal. Until we see another Signal Bar at #7 which is after rejecting the price from multiple levels (LTP, mid-LTP, 7EMA, 20EMA). A clear sign of continuing upward.
In candle #8, the price crossed and closed above UTP, followed by a pullback and a higher close in candle #9. At the same time, we reached the next TP based on UTP_2.
Becaused price has reached UTP_2, if 7EMA crossed and closed again we have to find a new MC. Candle #10 shows us that Candle #9 is the new MC. At candle #11 we have a Signal Bar at LTP and 20EMA. The perfect setup to go long!

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