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Genius is made with 1% talent and 99% work" Albert Einstein.
Quoting these words of the scientist and Father of television, I begin the trading strategy that as far as I am concerned has high levels of effectiveness if used correctly.
1) Definition and Detailed Explanation of "EMA Strategy + Trend Line Break".
Ema's strategy + trend line breakage
The EMA + trendline breakout strategy is a simple strategy, applicable for multiple charts and timeframes. It consists of a 100-period Exponential Moving Average (EMA), which is used to identify the strength of market movement and direction.
The market used as an example is (BTC/USDT) 1 day time frames TradingView
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Trend line
The trend line is formed by a maximum and a minimum point in the quotes of the asset, it is applicable for both market behaviors, either bullish or bearish.
For the trend channel to be valid it must touch at least 3 times the line, creating a "reliable" trend channel where in the company of candlestick patterns, market direction, supports and resistances, etc. any indicator with which its operation is pleasing to the trader with which they feel confident when making decisions to make an entry
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In this case according to the candlestick patterns, price action and a fundamental rule that indicated a change of trend accompanied by a break of the (EMA).
The market structure was broken, after the price movement did not make a higher high than the previous high, Many times we must take this signal into account. There is a possibility where the indicators give a positive signal and a trend change is actually forming.
I had my doubts... But, a candlestick pattern formed potential direction / trend change according to market movements can be deduced that liquidity is becoming scarce, the price, did not make a higher high than the previous one. Therefore, much supply little demand the price must fall breaks the (EMA) and continues.
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2- Detailed explanation of the role of the 100-period EMA in the EMA + Trendline Breakout Strategy
The exponential moving average (EMA) is a technical indicator that combines the prices of an asset over a given period of time and divides them by the number of selected data to create a trend line.
As I mentioned earlier, as long as the price stays above the EMA it indicates an uptrend, when it stays below it indicates a downtrend.
It can be advantageous to trade in favor of a trend, since large investors are injecting enough liquidity to maintain and give continuity to the movement.
Placing an (EMA) is not enough also depends on the trader's ability to determine the precise moment to make his entry.
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3- Detailed explanation of the role of the "Trend Line" in the EMA + Break Break Trend Line Strategy
Apart from being fundamental to apply the EMA + Trendline Breakout strategy, depending on the market circumstances the analyst must identify the buy or sell signals thrown on the chart.
If the quotes of the asset are above the (EMA) the trader must be patient and look for signals to execute a purchase. Where the indicated moment will be once the maximum points of the asset are joined and wait for the pronounced break of the trend line.
When the asset's candle makes the breakout and is above the line + the Exponential Moving Average is the right time to make an entry.
As long as the price is positioned below the (EMA) the signal is a sell signal and again we must be patient enough to respect the entry and proceed with a trade at the right time. For this case, the lowest points of the price will be joined and it will reflect the clear break in the trend line, this will be the right time to enter in sales.
Bullish and bearish example :
Bullish Example
Example Bassist
Step by step explanation of what to consider to execute the EMA + Trendline Breakout strategy correctly?
By applying some price action and other tools we can visualize the structure and look of the market, once the market pullbacks and strong points where the price can bounce or resist are identified. For a downtrend we must pay attention to the structures where lower highs and lower lows are present.
When the EMA is below the quotes of the asset, again we will look for structures where higher and higher highs and lower lows are marked, this is for an uptrend.
Finally what we are going to implement in the analyzed chart, will be trend lines. Once we have identified the current trend
For uptrends, downtrend lines are placed, joining the highest points of the price and waiting for the break of the trend line and the retracement of the asset.
When there is a downtrend, an uptrend line should be placed, identifying the lowest points of the price and waiting for the break of the trend line in the asset's retracement
Criteria to take into account when making entries and exits for the EMA + Trend Line Breakout strategy.
The requirements that the entry must have is primarily the position of the price and where the EMA is located. Once the trend is determined, either bullish or bearish, the market structure is identified in harmony with the quotes of the asset. That is, if it is creating higher highs and higher lows or vice versa.
Draw the trend line as mentioned above.... in bullish periods it is placed bearish and in bearish it is placed bullish.
Then be patient enough waiting for a breakout to make the entry as determined by market conditions.
It is important to have patience and good management because you would be disrespecting the strategy if there are sideways periods or the law of higher or lower highs and lower lows is not met.
It is necessary to find the ideal configuration of our executed strategy to maintain a good performance in the market.
With this I conclude the explanation of the strategy used for my commercial entries, I hope you like it and thank you very much for reading.
Hi @diego1306 An exponential moving average is a better tool than a simple moving average to follow trends, as it gives more weight to the most recent data and responds to changes more quickly, thanks for such interesting information, greetings and success.
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