EMA (Exponential Weighted Moving Average) Cross Over System

[MattyUSA]

Hi kamoro

There isn't a site as such. The EMA is a indicator built into most if not all Forex charts, whether they be on the web or in some desktop software.

I can't recommend a particur package or site but I'm sure others here can. I also suspect it'll be there in whatever you use for charts if you hunt for it.

Perhaps you'd be better off stating what it is you have and use. Others here might use the same and can advise you.

Best Wishes,
Matt

 

[fxtrader2k7]

Hi Matty'

Thanks for sharing. I've tried the system with mixed results. I made 120 pips the first time and lost 60 pips the second time. What's your results been like using this system?

John

 

[MattyUSA]

Hi John

I initially replied to this post but got confused and answered as if it were a different strategy. Sorry for the confusion to anyone watching this thread.

I am currently trying a different strategy (Volatility Exploitation Strategy) as such it is some time since I traded with this approach. If I recall I made pips per trade of between 10 pips, 110. I lost pips of between 20 and 80.

The longer the chart timeframe you use the more it is 'smoothed out'. What time frame and currency pair did you base your trades on?

30 minutes is usually safe'ish but if it proves risky for you on your currency pair try 60 mins. I know others use one timeframe for safer triggering entry and another more sensitive for triggering exits. The longer the time frame the less triggers you get but the safer they tend to be. The shorter the time frame the more triggers you get but the risker (more sensitive to fluctuations rather than trends) they tend to be. Also it isn't a good idea to try and trade far after the crossover. You need to catch it within 2 or 5 candle closes after the cross over entry point. Otherwise you risk it simply turning on you and you losing the trade.

If you plot the losing trade on a graph along with the EMA's perhaps there is some discerning factor like a late entry (caught me a few times) or a weird spike/fall. You're welcome to PM me your trade details I'd be interested in your experience. I only heard about this strategy rather than created it and I am trying others right now but more information on experiences with it can only help improve it.

Best Wishes,
Matt

I should add you can use RSI 14 as another indicator of a strong or weak trend beginning. Anyone else know of any others? Does RSI make sense for this?

 

[Popov]

Hello dear,
I've tested this strategy with Forex Strategy Builder - forexsb.com
The problem is maximum drawdown of 1400 pips when the profit is 560 pips only.

Forex Strategy Builder v2.5.3.3
Strategy name: EMA8x64 RSI14
Exported on: 12/2/2007 11:39:50 PM

Market: GBPUSD 30 Minutes
Spread: 3 pips
Swap Number: 1 pip

Intrabar scanning: Not accomplished
Interpolation method: Pessimistic scenario
Ambiguous bars: 0
Tested bars: 19467
Balance: 560 pips
Minimum account: -1033 pips
Maximum drawdown: 1407 pips
Time in position: 99 %

A same direction signal - Does nothing
An opposite direction signal - Closes the position

[Opening point of the position]
Bar Opening
Enter the market at the beginning of the bar
Base price - Open

[Opening logic condition]
Moving Averages Crossover
The Fats MA crosses the Slow MA upward
Base price - Close
Fast MA method - Exponential
Slow MA method - Exponential
Fast MA period - 8
Slow MA period - 64
Fast MA shift - 0
Slow MA shift - 0
Use previous bar value - Yes

[Opening logic condition]
RSI
The RSI is higher than the Level line
Smoothing method - Simple
Base price - Close
Smoothing period - 14
Level - 50
Use previous bar value - Yes

[Closing point of the position]
Bar Closing
Exit the market at the end of the bar
Base price - Close

[Closing logic condition]
Moving Averages Crossover
The Fats MA crosses the Slow MA downward
Base price - Close
Fast MA method - Exponential
Slow MA method - Exponential
Fast MA period - 8
Slow MA period - 64
Fast MA shift - 0
Slow MA shift - 0
Use previous bar value - No

 

[MattyUSA]

Hi Popov

Yes, when I used automated triggering it also let me down. Thanks for the tests however.

Just a reminder to anyone who missed this paragraph in the original post.

Has worked for me a number of times however care has to be taken since the lines can cross back and forth without any real profit. So automated trading with this is out. You have to wait a few candles or use other indicators to be sure it is a strong trend starting when the lines cross. I guess in theory it might be better on longer time frames (it is interesting to see the cross overs increase the shorter the timeframes get).

Also I'd guess the volatility of GBP/USD recently doesn't lend itself to this approach.

That said I have found that different measurements for the EMA values also helps.

For example I heard from another that:
EMA(10) Short
EMA(40) Long
Is a good indicator for bearish conditions (newbies: that's a falling chart line [sell])

Also as mentioned in some of the replies the trick is to work out what EMA values suit the currency pair you're trading.

If you get lots of small crossovers (the ones that cross money) then you need to play with the values to smooth them out. The shorter value shows short trends and makes the system more sensitive as it follows the spikes to a closer degree. The longer value shows longer trends. To get a safer system you might increase the shorter value to a higher number. In theory they'd cross less. Or increase the timescale, they'd increase less too. Also remember to use other indicators to confirm your guesses as to if the trend will be a short one or a profitable long one.

Popov your tests are great. If you can easily do them perhaps you could IM me and we'll try some automated tests with different values to see if the base system can be adapted for better automated trading.

However as it was presented in the original post it does not suit automated trading. It was/is only to help aid your own reasoning/decisions. Another tool for trading. Traders should find the EMA values that work for them and their favorite currency pair. Watch this space however, if Popov contacts me and we can figure out the EMA values that would work for automation then I/we will post them here.

Best Wishes,
Matt

 

[Popov]

Hi Matty,
my e-mail is info@forexsb.com.
I can help you with the tests. (I'm the author of Forex Strategy Builder)
I just visited this forum and I sow this strategy discussion.
The test I've made with EMA64/8 took me a minute.
If you are interested in I can make further comments about it. Or (better) you first test it alone.

Have fun!


**** Edit ****

Playing with the optimizer I achieved 2500 pips profit with drawdown of 750 pis but the strategy is heavily curve-fitted. EMA 68 / 8

 

[MattyUSA]

Thanks Popov.

That's wonderful. I'm rather pleased you introduced us to FSB. Thanks.

Great to hear it worked better for you with EMA(8/68). That surprised me I thought you'd have to increase to the fast EMA(8) to smooth out the smaller triggers. Just goes to show.

I have downloaded FSB and thanks again. It'll be some time before I can play with it but if I get consistent EMA values for automated trading I'll post it here.

Best Wishes,
Matt

 

[bmaq007]

Hi,
My name is Smith. I'm relatively new to forex trading and i have been demo-trading for about 2 months now.

I am currently trying to build a strategy which works (relatively well) for most of the currency pairs. I am really pleased that you have introduced this strategy (and the strategy building software, which i am downloading).

I hope to be able to help in developing this strategy to perfection.

Thanks man

Regards
Smith

 

[MattyUSA]

Hi Mr Smith

Wonderful. Please keep us posted (pun intended).

I have had time to do much more than work sleep and college so forex has taken a back seat for me.

Best of luck
Matt

 

[FirstStep]

Thanks for that Matt,
I'm a newbie having mixed sucesses (still my first forex trading week) and will definately set your model up to aid my decisions. I'll try and look at your VES too,
Regards from sunny Australia
Sinc