Here are two popular EMA setups for scalping. You can try them out and decide which one is the best EMA crossover for your strategy.
Among numerous forex trading strategies, Exponential Moving Averages (EMA) crossover is one of the easiest and most popular for beginners. Just like any other Moving Averages, EMA is easy to understand and we don't have to obtain ample experience in order to know how it works. However, lots of people aren't sure which is the best EMA crossover to get the right signals for scalping.
In this article, we will examine two popular EMA setups for scalping. You can try them out and decide which one is the best EMA crossover for your strategy.
The 5 and 15 EMA Crossover
This combination usually works well for trend-following strategy during trending markets in lower time frames (M5, M15, M30), but becomes far less accurate in ranging markets or calm situations ahead of important news releases.
The rules for the 5 and 15 EMA crossover setup are as follows:
- Long signal: After the 5 EMA line goes upward and crosses over the 15 EMA line, make sure that the last candle has closed in bullish condition. Enter buy position soon after, then set target profit anywhere between 5-60 pips along with stop loss between 5-20 pips. Remember to set lower TP and SL in lower time frames.
- Short signal: After the 5 EMA line goes down and crosses over the 15 EMA line, make sure that the last candle has closed in bearish condition. Enter sell position soon after, then set target profit anywhere between 5-45 pips along with stop loss between 5-15 pips.
The 10 and 20 EMA Crossover
The 10 and 20 EMA setup works better in M15 and M30 time frames, but becomes noisier in lower time frames such as M5 and rarely shows trading opportunity in higher time frames (H1 and above). Still, this combination opens up opportunities to gain more profit from each trade position during a trending market compared to the previous setup.
The rules for the 10 and 20 EMA crossover setup are as follows:
- Long signal: After the 10 EMA line goes upward and crosses over the 20 EMA line, make sure that the last candle has closed in bullish condition. Enter buy position soon after, then set target profit anywhere between 10-60 pips along with stop loss between 10-20 pips.
- Short signal: After the 10 EMA line goes down and crosses over the 20 EMA line, make sure that the last candle has closed in bearish condition. Enter sell position soon after, then set target profit anywhere between 10-60 pips along with stop loss between 10-20 pips.
So, which EMA crossover setup would you choose? Whichever it is, ensure that you have practiced it well on the demo account first before applying it on the real account.
Aside from that, you should also improve your skills in analyzing price actions. Lots of experienced traders avoid using EMA and other Moving Averages for high-frequency trading because they belong to lagging indicators that are often late to trigger trading signals at the right moment for optimum yield.
Overdependence on EMA crossover also limits your opportunities as it would only run smoothly for trending markets, and more specifically, trend-following strategies. To boost your gain, it would be better to learn further about other -and probably more complicated- forex trading tools.
2 Comments
Jan 15 2024
Hello! I want to clarify something. The article discusses the optimal EMA crossover strategy for scalping within either a 15-minute or 30-minute timeframe. From that information, I've gathered that once the 10 EMA line trends upward and crosses the 20 EMA line, it's crucial to ensure the most recent candle closed in a bullish manner. Following this, you'd enter a buy position, aiming for a profit target ranging between 10-60 pips. Additionally, set your stop loss between 10-20 pips. The same principle applies in reverse for selling positions.
Given this strategy, I'd like to inquire: for a beginner, which combination between 10-60 pips is most advisable for both take profit (TP) and stop loss (SL)? For instance, what would be the most appropriate stop loss if targeting a 20-pip profit? I appreciate your guidance on this.
Jan 15 2024
Hello! In the context of the EMA crossover strategy for scalping, the choice between a 10-60 pip take profit (TP) and stop loss (SL) largely depends on your risk tolerance and trading preferences. (read : Trading Loss: How to Prevent It in 5 Ways )
For beginners, it's often recommended to start with a balanced risk-reward ratio. A common approach is to set a TP and SL that are roughly equal, providing a 1:1 risk-reward ratio. For instance, if you are targeting a 20-pip profit (TP), consider setting the stop loss at around 20 pips as well. As you gain experience and become more familiar with the strategy, you can adjust your TP and SL based on your risk tolerance, market conditions, and the specific currency pairs you are trading. It's essential to backtest and practice the strategy in a demo account to refine your approach and find the TP and SL combination that suits your trading style.