[Basic EMA Strategy + Trend Line Break] - Crypto Academy / S4W6 - Homework post for @ lenonmc21

Hello everyone. I welcome everyone in another informative week of this amazing community. This lecture is delivered by professor @lenonmc21 in which he discussed the EMA strategy and Trend line break. Let's move toward the given task without any delay.

QUESTION 1 - Define and Explain in detail in your own words, what is the Strategy of the EMA + Breakout of the Trend line?

Moving average is an indicator which the traders use to analyze the market. This indicator help to get the information about average change in the price of an asset in a specific time duration. This indicator give the average value of price of the assets and using this, the traders take the important trading decisions.

The people use this indicator to get to know the price trend of the coin for a specific period of time. There are different type of the Moving average indicator like SMA, EMA, WMA, etc. The traders choose the MA indicator which suit best for his trading strategy. The most common MA indicator which the traders use to analyze the market are;

• Exponential Moving Average(EMA)
• Simple Moving Average(SMA)

This indicator give the information about the real price movement of the asset in the market. An uptrend is created in the market when price action above the 50-day MA. This is simple to use as the traders do not need to face any complexion while using this indicator. When the price get reset at the 50 or 200 day Average, the investors start trading then to earn the profit. This indicator help the trader to take the important trading decisions in a right way.

In the above screen short we can see that when the price of the asset decline to the 50 day average, the buying pressure get increase and price rise fastly after testing the 200 day average..

This is another type of the Moving average average past price movement of coin is calculated. This trend indicator ignore the slight fluctuation in the price. This trend focus on the current price and put more weight on relevant data. The data about the general trend of price of coin is collected using this indicator. This indicator is easy to use and mostly used by the intraday traders because this indicator show fast price signals. This indicator add more weight and let the traders to predict the market showing the general trend of price in the market. The traders use this information and make the important trading decisions.

The EMA calculate the past price movement of the coin in market according to its own method. The EMA continue with price on chart . This indicator give information which let the traders to predict the market. There are short, long, medium EMA which the traders use according to their own needs.

While using this indicator, the traders have to wait for the price to move above the EMA indicator line in order to open the buy trader. The asset below the EMA indicator is downtrend. So the investors wait the asset to move above the EMA to place the buy order and to enter into market.

In the above screen short, we can see that when the asset was below the EMA, it was in downtrend. The traders were waiting the asset to rise above the EMA> when it risse above the EMA, the investors did the buy trade to earn the profit because now the market start moving upward.

Breakout

When the price of an asset rise upward and cross the resistance level or move downward and cross the support level, the breakout is occur. After crossing the resistance level or breakout, the price continue to rise . Similarly after crossing the support level or breakout, the price move more in downward direction.

Trend Line

The trend line is drawn when we connect the pivot points of the high and lows on the chart. This help us to get to know where the market is moving. The uptrend or downtrend is observed while seeing the trend line.

No indicator is perfect. There are always some week points in every indicator because of which, the result is not 100% accurate. The efficiency and accuracy of result of an indicator can be increased by combining it with different indicators or strategies. Here the Trend Breakout is a useful method which the investors use to get more accurate result. These breakouts help the traders in up and down trend to earn profit and to save from lose. No matter that these breakouts are also not 100 true but still used on large scale by indicators because the success rate is high.

As we have talked above that the EMA indicator is a type of MA where the past price movement of the coin in market is calculated. The EMA line continue to move with price. This trend indicator ignore the slight fluctuation in the price. This trend focus on the current price with more weight. The data about the general trend of price of coin is collected using this indicator.

The Accuracy of EMA get more when it combine with the breakout of trend line. The EMA calculate the past price movement and give you price direction using which the traders take the trading decisions. But while using the EMA, keep an eye simultaneously on the price movement on chart too. The EMA + Breakout the Trendline strategy is very useful strategy. The EMA is combined with price action technique which generate more accurate results.

In the above example, i have explained the EMA combining with Breakout the Trendline strategy . First the traders wait until the price rise above the EMA 100. After that they get position to enter into market using Breakout the Trendline strategy and buy coin. After that we see that the price is rising upward. After crossing the breakout, the price of coin continue to rise in same direction.
QUESTION 2 - Explain in detail the role of the 100-period EMA in the EMA + Trendline Breakout Strategy

The EMA is an indicator which the investors use to predict the market. This useful indicator calculate the past price movement and put the weight to relevant data which help the traders to analyze the market in more accurate way in a specific time duration. If we talk about the 100 EMA, this will give the information about price movement of last 100 days.

The EMA 100 help the traders to get to know about the market trend. The traders see which trend i there in market by seeing the data generated from the EMA 100. When the price chart is above, it indicate the uptrend and when price chart is below, it indicate the downtrend. The user get to analyze the market for last 100 days.

The 100 EMA give you the trend reversal signal which indicate that the trend is going to change. When we see that the price chart is moving above the 100 EMA, we know its downtrend. But if price chart suddenly cross the 100 EMA and start moving in downward direction, the downtrend is expected to start. Similarly if price chart is moving downward and suddenly break to 100 EMA and start moving upward, the downtrend is expected to reverse into uptrend.

The EMA is used by the traders on the huge volume because it give you quick signal of price movement. The trendline breakout strategy make this indicator more accurate. The traders get the more accurate position in the market. When the market is moving downward, this indicator give the downtrend signals.

When the price start moving above the 100 EMA, the investor wait for the best position. Here the breakout help. If the price chart cross the breakout, it is best point to enter because an uptrend is expected. Same happen when the market is trending above the 100 EMA

QUESTION 3 - Explain in detail the role of the "Trend Line" in the EMA + Breakout Strategy Trendline Breakout

The trend line is drawn when we connect the pivot points of the high and lows on the chart. This help us to get to know where the market is moving. The uptrend or downtrend is observed while seeing the trend line. This tell us the direction of market and where the market is moving. If the trendline is moving from down to up, it mean that there is bullish trend and when the trendline direction is from up to down, it indicate the bearish trend.

But we should consider some points while joining the pivots. If the market is trending upward, each next point we connect to draw the trend line should be greater than the previous one. Similarly, in downtrend case, each point should be lower than the previous point.

In above example, the market is in downtrend, The price of coin is falling down as we can see that the price chart is below the EMA. We can see that each low is lower than previous low. When we connect the pivot point, the trend line drawn. If the price of coin is trending upward, price breakout the EMA and move above the EMA, it give the buy signal. When the trend line is moving downward, price break the EMA and start moving below EMA, it give exit signals.

The Trendline when combined with EMA give more clear and accurate result. The traders get to know about the direction of market and market trend. They take important trading decision in more successful way when the trend line get combined with the EMA Breakout Strategy Trendline Breakout.

Identification of trend

The trend line help to identify the trend. When connection the peak spots, we draw a line moving in downward direction , it mean market is trending downward. If trend line is moving from bottom to top, it mean market is trending upward.

Breakout

The trendline, help to identify the breakout. This line guide the traders about the breakout in the market.

In the above screen short, the break out give you an entry signal. So the trendline give the break out signal which help the traders to determine whether to enter into the market or exit from the market.

QUESTION 4 - Explain the step by step of what needs to be taken into account to execute the EMA + Trendline Breakout strategy correctly

The uptrend and downtrend occur in market when the buying pressure or selling pressure get high. When the buying pressure get high, the demand increase and price move upward. When the selling pressure get high, the supply increase and price decrease. We should wait for the breakout candle on the chart before entering or exiting from the market.

The uptrend and downtrend of market are highly focused while using the EMA + Trendline breakout strategy. In uptrend and downtrend, following point should be taken into account to while using the EMA + Trendline breakout strategy 

1- In uptrend, the market price of asset should move in upward direction above the EMA. The higher high spots are connected with each other to form trend line. Each higher high should high as compare to previous. The trendline which we draw on the chart should follow the price direction. When the price rise and breakout occur, it consider a best spot to enter into the market. When the price cross the breakout and move upward, it identify that the market will move upward.

2 - In downtrend, the market price of asset should move in downward direction below the EMA. The Lower low spots are connected with each other to form trend line. Each lower low should lower as compare to previous. The trendline which we draw on the chart should follow the price direction. When the price fall and breakout occur, it consider a best spot to exit from the market. When the price cross the breakout and move downward, it identify that the market will move downward. So we should sell out assets.

Below are the several points to pay attention on.

EMA 100

First of all, we should set the 100 EMA. If the market price start moving above the 100 EMA, it mean that the market is moving toward the bullish trend so we should enter into the market. When the Price start moving below the 100 EMA, we should exit from the market because a downtrend is expected.

Trend line

The trendline also very useful to find out the market trend. This tool help to make the EMA produced signals more strong. This give us better entry and exit spot. When the trend line is showing market downward but the price move above the 100 EMA, we should wait until the price cross EMA and trend line also move upward direction, we should buy coins.

Question 5- What are the Trade entry and exit Criteria for the EMA + Trendline breakout strategy?



When the price move above the 100 EMA, we should enter into the market. This is best spot to buy the assets. This give us signals that market is in bullish trend. The trend line work best to identify entry spot while using EMA. When we observe another bull candle in market, we should draw the trendline and should enter into the market. While buying the coin, set the stop lose and take profit ratio. The stop lose is below and take profit is set above.

Similarly, if price is moving below 100 EMA, it mean market is in bearish trend. When bearish trend is expected to start, we should exit from the market. The trend line help to identify the trend in market best when use with 100 EMA. it give us best entry and exit signals. We should draw the trend line and when price start falling, when it touch the trendline, we should exit from the market. Set stop lose and take profit ratio. Now stop lose will be set above and take profit will be at bottom

We should wait for a clear breakout candle on the chart before entering or exiting from the market. When the price move upward and cross breakout, we should enter into the market. But do not forget that not all the breakouts are suitable for entering into the market. We should not enter into the market when we see a long candle breakout occur which will show the movement away from the trendline. In such cases, a huge stop lose distance is created so instead of taking the trading decision at this spot, we should wait until a next breakout occur. And then shout enter into the market.

Practice (Only Use your own images)

Make 2 entries (One Bullish and one Bearish) in any pair of "Cryptocurrencies" using the "EMA Strategy + Trend Line Break" (Use a Demo account, to be able to make your entry in real time at any timeframe of your choice, preferably low temporalities)

In the above graph, i have made an entry in the market. The price is moving above the 100 EMA which mean that there is up trend in market. First i draw trend line and wait the price to touch the trend line. When it touch the trend line, i made an entry into market. I bought the coin while setting the take profit and stop lose at ratio 1:1

In the above graph, we can see the price is below the 200 EMA which mean market is in downtrend. First i draw the trend line. When the price touch the trend line, it give us signal to exit from the market. I set stop lose and take profit at ratio 1:1

Conclusion

In Exponential Moving average average, past price movement of coin is calculated. This trend focus on the current price and put more weight on relevant data. The data about the general trend of price of coin is collected using this indicator. When the price start moving above the 100 EMA, it mean market is in uptrend, When the price move below the 100 EMA, it mean market is in downtrend. I thanks to professor @lenonmc21 for this lecture.