Simple EMA 60 Trading Strategies

A simple yet powerful indicator, EMA 60 is the center of trading strategies revealed in this article, Here you can learn how to profit from opportunities generated by EMA 60 trading strategies.

Nowadays, forex traders can easily create a simple trading strategy to look for trading opportunities. One kind of strategy that stands up the most is the one utilizing the moving average (MA). Moving average is used primarily as a trend indicator as well as to identify support and resistance levels. The two most common MAs are the Simple Moving Average (SMA), which is the average price over a given number of periods, and the Exponential Moving Average (EMA), which gives more weight to recent prices.

In this article, we will focus on forex trading strategies with a 60-period Exponential Moving Average (EMA 60). The advantage of EMA 60 trading system is that your chart will look neat and optimized, free of clutter or worse, confusing trade signals. And despite its seemingly basic appearance, you will be surprised at its performance and capability of finding great trades.

4 Steps to Set EMA 60 Trading System

In summary, there are 4 simple steps to fully utilize this trading system. Each stage will help you get a sense of the likely direction of price movement in the short to medium term. You can find the 4 steps as follows:

1. The 4-Hour Chart

The first action is to add an EMA 60 indicator to a 4-hour price chart. You can find it in MT4 under the category of Trend Indicator. From the figure below, you can identify the EMA 60 from its pink colored line.

Then, we need to ascertain whether the price is above or below the moving average. Which, in this case, the price is above the EMA 60 line, so we can safely proceed onto the next step.

2. The 1-Hour Chart

The second step is to open a 1-hour price chart of the EUR/USD. In the picture below, we can confirm that the price had a couple of bottoms below the 60 EMA, but has now moved back above the indicator. Since both 4-hour and 1-hour price charts show the current price above the EMA 60, we can find that now is a good time to look for a buy entry.

Since both requirements in Step 1 and Step 2 are fulfilled, we can proceed to Step 3.

3. The 30-Minute Chart

Since both the 4-hour and 1-hour charts are indicating a bullish sentiment, we can find a buy entry in the smaller chart. In this case, we take a 30-minute chart as the focus. We can place an entry order at the pullback so there is a confirmation that the price is still continuing its rally above the EMA 60.

4. The Exit

Now that we have a nicely positioned buy transaction, we need to plan our exit point as well. A complete trading cycle is all about buying at a lower price and selling at a higher price. Nonetheless, it can be pretty personal when it comes to exit strategy since everybody has different risk tolerance. We have prepared several different available options that you can use an exit point that suits your trading preference the most.

• Option 1, you need to have a predetermined target; either at least the same amount as you are risking, or twice or 3 times the risk.
• Option 2, you need to follow the trade by moving the stop loss order as the price makes pullback lows. Each time a new pullback low appears, you can maximize the opportunity by trading it up.
• Option 3, you employ a trailing stop. The stop loss order will be automatically moved in line with the price movement in a certain direction, making it easier to adjust the risk based on the latest market condition.

The Double EMA Channel Forex Trading System

Another variant of trading strategy commonly used the EMA 60 is the double EMA trading strategy. This strategy is also commonly known as the double EMA channel trading strategy because in this strategy, we will use two Exponential Moving Averages as a channel that follows the movement of the trend.

This trading system is relevant for all currency pairs and on any time frame. Yet, higher time frames usually award more potential pips to be made, so it is highly recommended to use a higher time frame for the double EMA trading strategy. Furthermore, a higher time frame usually gives better trend definition and accuracy to trace price movement.

In Double EMA Channel Trading Strategies, we will need to set 4 EMAs with different parameters:

1. A 60-period EMA applied to highs.
2. A 60-period EMA applied to lows.
3. A 240-period EMA applied to lows.
4. A 240-period EMA applied to highs.

Please note where we need to apply the moving averages indicators and make necessary adjustments as required in the indicator window. Below is how the EMAs appear in a EUR/USD daily chart:

The pink lines represent EMA 60 while the yellow lines are EMA 240. Please note that the darker colors are applied to highs, while the lighter ones are EMA lines that are applied to lows.

Now that we have finished setting the indicators, as usual, we will move forward with executing the strategy. Since double EMA trading strategy is a trend-following strategy, we need to look at these three important factors:

1. The EMA 60 lines must be located either above the EMA 240 to signify a bullish situation, while the EMA 60s' movement below the EMA 240 indicates a bearish signal. It will make it easier to view both 60-period MAs as one single tunnel, and the 240-period MAs as another tunnel.
2. Next, we want both sets of moving averages to have an angle towards the intended trade directions. In short, we want all four moving averages to point the price trend.
3. In some cases, only one of the EMA 60 lines above the EMA 240 lines can still be considered as a buy signal. On the other hand, a sell signal can still be concluded from one EMA 60 line moving below the EMA 240 lines.

Now that everything is set in place, we can start trading. There are two scenarios of which trade conditions can occur, a buy entry and a sell entry. We can identify the characteristics of both setups below:

The Buy Scenario

1. For buy scenarios, make sure that the EMA 60 tunnel is above the EMA 240 tunnel, or at least one of the EMA 60 lines is above the EMA 240 tunnel.
2. The candlestick moves into the EMA 60 tunnel.
3. Wait until the price breaks the upper EMA 60 line.
4. Then, after a brief pullback, you can go long at the open of the next candle.

Remember that you should execute the long trade at the next candlestick's opening price. You can find the demonstration of this trade setup here:

The stop loss is set at a few pips below the EMA 60 tunnel. For example, we can set it below the lower of the two EMA lines. Oftentimes, you will notice that after the long entry, a few price action candles try to go below the tunnel but are prevented from doing so by the lower of the two 60 EMA lines.

The Sell Scenario

1. The EMA 60 tunnel is located below the EMA 240 tunnel, or at least one of the EMA 60 lines is located below the EMA 240 tunnel.
2. The candlestick moves into the EMA 60 tunnel.
3. Wait until the price breaks the lower EMA 60 line
4. Then, after a brief pullback, go short at the open of the next candle.

Here is what the setup looks like:

The stop loss is set to a few pips above the upper 60 EMA line. That way, your sell position will be safe from the risk of a bullish reversal.

The double EMA channel trading strategy performs very well in a trending market, and less so in a range-bound market. Therefore, trades should be made as much as possible on higher time frames when it is sure that the market is trending.

Hopefully, the aforementioned strategies involving the EMA 60 can show you that setting up a profitable trading system might not be as hard as you think. In fact, there are some world-class traders who rely on simple trading strategies, since the simpler the system, the easier it is to follow through. However, you need to makes sure that whatever simple strategy that you would like to try, you should thoroughly practice with it on a demo account first.

Aside from the simple EMA 60 strategy and the double channel system, other strategies involving Exponential Moving Average have been developed with various periods and combinations. One of them is the three EMA crossover lines that may proved worthy to be applied if you tend to follow the trend.