3 EMA Forex Signal Trading Strategy

The 3 EMA forex signal trading strategy is designed to help you make the best out of price swings and is composed of multiple exponential moving averages.

Let’s take a quick look at how things pan out when deploying our awesome strategy.

Chart Setup

MetaTrader4 Indicators: VIDYA.ex4 (Input Variable Modified; period=18, Colors Width Modified; #0=2), 36 EMA, 5_34_5.ex4 (Default Setting))

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day

Recommended Trading Sessions: Any

Currency Pairs: Any pair

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Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy in the market if the following indicator or chart setup gets displayed:

  1. If the red line of the 5_34_5 custom MT4 indicator break and hovers above the 0.00 level as seen on Fig. 1.0, price is said to be pressured to the upside i.e. a trigger to buy the stipulated currency pair.
  2. If the 36 EMA magenta line crosses the blue line of the VIDYA custom indicator bottom up as illustrated on Fig. 1.0, the most favored sentiment in the market is said to be bullish i.e. a trigger to buy the currency pair of focus.

Stop Loss for Buy Entry: Place stop loss below trading support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following rules or conditions takes precedence:

  1. If while a buy signal is ongoing, the red line of the 5_34_5 custom indicator dips below the 0.00 level as indicated on Fig. 1.0, price is said to be making a possible U-turn away from its earlier bullish stance, as such an exit or take profit will do.
  2. If price closes below the magenta 36 EMA line when a bullish trend is ongoing, it is wise to exit or take profit on position(s).

Sell Entry Rules

Enter a sell order if the following holds true:

  1. If the red line of the 5_34_5 custom MT4 indicator break and stays below the 0.00 level as shown on Fig. 1.1, price is said to be pushed lower i.e. a trigger to sell the stipulated forex pair.
  2. If the 36 EMA magenta line intersects the blue line of the VIDYA custom indicator top downward as depicted on Fig. 1.1, the preferred sentiment in the market is believed to be bearish i.e. a trigger to sell the currency pair of interest.

Stop Loss for Sell Entry: Place stop loss above trading resistance.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following takes center stage:

  1. If while a sell alert is continuing, the red line of the 5_34_5 custom indicator surges above the 0.00 level as specified on Fig. 1.1, bears are said to be taking a hit in the market, hence an exit or take profit is advised.
  2. If price closes above the magenta 36 EMA line when a bearish trend is continuing, it is clever to exit or take profit on position(s) forthwith.

Sell Trade Example

Fig. 1.1

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About The Trading Indicators

The VIDYA or Variable Index Dynamic Average uses an exponential smoothing as a base of varying the speed or the trend each day.

It then deploys a pivotal smoothing constant and varies the speed by using a factor base on the relative volatility to increase or decrease the constant.

Volatility measure based on the standard deviation compared with a longer historic pattern.

The 5_34_5 is an EMA custom indicator with an obvious strange name and oscillates around the 0.00 signal level.

It pops up in its own indicator window and comprises of two lines (light blue and a red).

The 36 EMA is an exponential moving average that has its period set at 36 and reduces the lag by adding more weight to recent prices.

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