LTCUSD 2H EMA LONG STRATEGYStep #1: Plot on your chart the 20 and 50 EMA
The first step is to properly set up our charts with the right exponential moving averages so we
could be able to identify the EMA cross at the later stage. The exponential moving average
strategy uses the 20 and 50 periods EMA.
Most standard trading platform come with default moving average indicators so it should not be
a problem to locate the EMA either on your MT4 platform or Tradingview.
Step #2: Wait for the price to trade above the 20 and 50 EMA and wait for the
EMA crossover
The second rule of the exponential moving average strategy is the need for the price to trade
above both 20 and 50 exponential moving averages and secondly, we need to wait for the EMA
crossover which will add more weight to the bullish case.
We refer to the EMA crossover for a buy trade when the 50-EMA crosses above the 50-EMA.
By looking at the EMA crossover we create an automatic buy and sell signals.
However, since the market is prone to do a lot of false breakouts we at Trading Strategy Guides
need more evidence than just a simple EMA crossover. At this stage, we don’t know if the
bullish sentiment is strong to push the price further after we buy so we can make a profit.
To avoid the false breakout we added a new confluence to support our view which brings us to
the next step of the exponential moving average strategy.
Step #3: Wait for the zone between 20 and 50 EMA to be tested at least twice,
then look for buying opportunities.
The conviction behind the exponential moving average strategy relies on multiple factors to
confirm a new trading idea. After the EMA crossover happened, we again need to exercise a
little bit more patience and wait for two successive and successful retests of the zone between
the 20 and 50 exponential moving averages.
The two successful retest of the zone between 20 and 50 EMA gives the market enough time to
actually develop a trend.
Never forget that in trading no price is too high to buy, and no price is too low to sell.
Note* When we refer to the “zone between 20 and 50EMA” we actually don’t mean that the
price needs to trade in the space between the two moving averages. We just wanted to cover
the whole price spectrum between the 2 EMAs because the price often times will only briefly
touch the shorter moving average (20-EMA) which is still a successful retest.
Step #4: Buy at the market when we retest the zone between 20 and 50 EMA.
If the price successfully retests the zone between 20 and 50 EMA for the third time we go ahead
and buy at the market price. We now have enough evidence that the bullish momentum is
strong to continue pushing this market higher.
Step #5: Place the protective Stop Los 20 pips below the 50 EMA
After the EMA crossover happened and after we had two successive retests we now know the
trend is up and as long as we trade above both exponential moving averages the trend remains
intact.
In this regard, we place our protective stop loss 20 pips below the 50 EMA. We added a buffer of
20 pips because we understand we’re not living in a perfect world and the market is prone to do
false breakouts.
Step #6: Take Profit of your choosing or once we break and close below the 50-EMA
In this particular case, we don’t want to use the same exit technique as our entry technique
which was based on the EMA crossover.
If we would be waiting for the EMA crossover to happen on the other side then probably we
would have given back some of the potential profits because we still need to consider the fact
that the exponential moving averages are still a lagging indicator.
Note** The above was an example of a BUY trade… Use the same rules – but in reverse – for a
SELL trade. However, because the market goes down much faster, we sell on the 1st retest of
the zone between 20 and 50 exponential moving averages after the EMA crossover happened.
