While you can’t see on this chart, price actually did close below the 34 EMA.Another momentum move breakdown and a setup to avoid.I would have been unable to participate in this move. We were unable to draw a down trend line at #1 on this time frame using my rules.While you may miss moves, it does prevent you being in a position that “snaps back”. Why is this not an entry? A rule of thumb for traders is to wait for a pullback after a momentum move in price. This is a great place to exit the trade as A. After a 5% run up in price, we get a break of the trend line and moving average on a closing basis.On this chart, you will learn a way to take profits as well as setups to avoid. The longer term line was broken long after price crossed the 34 EMA. The green circle is a break of the 34 EMA and closing above the shorter term downtrend line.

Sorry for all the lines but they are needed to give you the proper perspective. This is something a trader must come to terms with before ever risking money in the market.Ī great example is this futures contract of SUGAR – one hour chart. Traders can enter on close or buy stop the high of the trigger candlestick.Įvery single trading strategy will lead to losers as well as missing big moves. Price breaks both the moving average and the trend line to the upside. Price breaks the short term trend line to the upside putting us on alert for a potential long setup We need both the average and the trendline to be violated on close.Īs we move to the middle of the chart, we find our setup and trigger rules in effect: Looking at the chart above, we see on the left that price did break the moving average and close above it. Price breaks above (for a long) both the moving average and the longer term trend line Look to see an early warning of a setup with a break of the shorter term trend line Once you have the trend lines and the EMA on your price chart: We are looking to see a break of both the rhythm of the market and the trend direction Here is the same chart with both the trendlines and the 34 exponential moving average.Īpply an exponential moving average to your chart and set the lookback periods to 34ĭraw relevant trend lines ensuring you have a longer term line and a short term line Since we see that trend lines show a rhythm to the market, and when that rhythm finally breaks, we can combine it with the moving average for trend direction and entry trigger. However, often times traders will use a close above/below a trend line for trend direction.Ĭombining the 34 EMA + Trendlines For A Trading Strategy Price breaks above and below the moving average several times and that is not a way you’d want to trade it. You can see the slope showing downtrend, uptrend, and a flat moving average that will either show a market in trend transition or a trading range. This is just a medium length moving average and one that I have used in the CCI trading strategy. I don’t want you going down the moving average rabbit hole looking for best settings for the moving average. That’s is all you really need to know about trendlines in the context we are going to use them. This line will break before the long term and that just puts me on alert of a potential change in market state.īreak above/below long term line is a change of trend to be confirmed with price action For my rules, I have be able to connect the last swing into lows/highs.

The red line connects the final swing into the low. This is the longer term line and indicates the prevailing trend long term. On the left, we have a downwards trendline that connects the peaks of price. For a more in-depth review of drawing trendlines, you can review the article: Define Your Trend Line Drawing Rules This is not a complete trendline tutorial. When price action begins to break from through the trendlines, we are seeing a change in the rhythm and balance of power shift. Trendlines are a good tool to find the rhythm of the market. This 34 EMA trading strategy not only uses an exponential moving average, but also includes trend lines. If we break down what we are looking for in a strategy, it is simply: the probability of one thing happening over another. In fact, when you have too many moving parts in a strategy, it’s difficult to make adjustments or even just test it. Your trading strategy does not have to be complex.

Ema trading