EMA channel-Supertrend trading strategy

EMA channel-Supertrend trading strategy

EMA channel-Supertrend trading strategy

 

Exponential Moving Average (EMA) is similar to Simple Moving Average (SMA), measuring trend direction over a period of time. However, whereas SMA simply calculates an average of price data, EMA applies more weight to data that is more current. Because of its unique calculation, EMA will follow prices more closely than a corresponding SMA.

 

The super trend indicator is created by Olivier Seban to work on different time frames. It works for futures, forex, and equities. It is used in 15 minutes, hourly, weekly, and daily charts. Based on the parameters of multiplier and period, the indicator uses 3 for multiplier and 10 for ATR as default values. The Average True Range is represented by the number of days while the multiplier is the value by which the range is multiplied.

Now let’s move to a strategy of a combination of EMA channel and super trend.

We will use two 48 periods EMA. The first 48 periods EMA will have a source value “high” as shown in the below image.

 

And second 48 period EMA will have the source value set to “low”.

And will add a super trend(10,3) indicator to add accuracy.

Our setup is complete. We have plotted the required indicators on the chart.

Now we will see how to take buy and sell entries.

Buy: 

1.  Price should be above EMA channel.

2.  Wait for the super trend to give a buy signal.

3.  When Supertrend gives a buy signal, the candle where the super trend gave the buy signal should open and close above the EMA channel. When the candle closes above the super trend and EMA channel, we will initiate buy trade at the high of the closing the candle.

 

Sell: 

 

1.  Price should be below EMA channel.

2.  Wait for the super trend to give a sell signal.

3.  When Supertrend gives a sell signal, the candle where the super trend gave the sell signal should open and close below the EMA channel. When the candle closes below the super trend and EMA channel, we will initiate sell trade at the low of the closing the candle.

Stop loss: 

Exit from the trade if any candle closes against the EMA channel. Trail SL using the channel.

Time Frame: 

This strategy works better in higher time frames. Backtest it and if the results are good then apply.

 

Originally posted 2021-04-30 13:32:41.

sandesh.k0101

sandesh.k0101

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