EMA Indicator

Incredible market trend detector – EMA Indicator. A perfect forex indicator for determining the trend direction and tracking price action of different pairs.

CATEGORIES: TREND, MT4, SIGNAL, LEVELS
Updated on: 28.11.2023

Moving averages (MA) is one of the handy tools for forex traders. They show price changes over a certain period. It is worth noting there are four types of MA, including the EMA. Exponential moving averages (EMA) attach more value to the recent prices. This means it reacts more to the recent price changes than simple moving averages. Additionally, the EMA indicator for MT4-free download detects price changes early enough. However, it experiences more changes over a short time.

Trading Using the EMA Indicator
There are several ways to make use of the EMA indicator.

Generally, a rising EMA represents a bullish market, while a declining EMA depicts a bearish price movement. This means that you should be looking to open sell positions when the EMA is descending and go long when the EMA is ascending.

You should also look at the position of the EMA to get the general market trend. When the price trends moves above the exponential moving average line gives a telltale sign of an existing uptrend. Similarly, if the price is below the EMA line, it indicates that the market is in a downtrend.

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Crossover Strategy
The Crossover strategy gives better buy and sell signals. Ideally, this strategy involves using fast and slow EMA periods, typically 9 and 21 periods EMA.

A buy signal is generated when the shorter EMA intersects the longer period EMA from below. Similarly, when the shorter EMA crosses the longer EMA from above, that is interpreted as a sell signal.

Now, what is the exit strategy, you ask? Well, you can place the indicator at the recent low and place profit at the next high or resistance zone.

Triple EMA strategy
With triple EMA, the indicator gets better. It involves using three different periods to generate better signals. For instance, you could choose to use the 5, 15, and 200 EMA periods. For buy signals, the price should be trading above the 200 EMA line. Then wait for the five EMA to insert the 15 EMA line.

Chart Example

The picture above shows a price chart for Great Britain Pound against the Australian dollar. The blue line shown by the gray arrow represents 5-period EMA. The red line shows the 15-period EMA, while the green line shows the 200-period EMA.

Note that the price is trading above the 200-period EMA. The indicator provides a buy signal when the blue line crosses the red line, as shown by the yellow circle. In fact, the price sustained an uptrend after the signal.