More On Technical Indicators
Do you often rely on the EMA strategy for intraday trading? But are you using the right strategy for EMA? Are you aware of the best EMA for intraday trading?
If you are not getting a perfect result on using the EMA strategy then might be you are not using it correctly.
So, let’s learn how to use the exponential moving average and what is the best setting for the indicator for day trading.
Best EMA Strategy for Intraday Trading
Which are some of the best intraday trading indicators? The answer for this is known to all, but how to use it proficiently is the biggest challenge for traders especially beginners.
To ease things for you here is the best EMA strategy for intraday trading.
EMA being the lagging indicator tells you a lot about the market condition and trend.The indicator is used to determine the trend and further in making a decision for entry and exit points.
It gives more weightage to the recent data and is calculated using the closing price of the latest time period.
Now the time period!
What time period is the best for EMA?
In general, the EMA is set at 9 by default. This is good for the short term, but most intraday traders pick the value of 8 or 20 to get a better interpretation of price information and to make trade decisions.
Here the price trending above the moving average gives the bullish signal. On the other hand, the price trend below the EMA line creates an opportunity for short-selling.
Let’s see how EMA works?
Here to cite an example, 20 days EMA is chosen to do an analysis of DLF stock.
When the moving average is below price then it gives the clear signal to ‘Buy’.
On the other hand, 20 period EMA above stock price gives the signal, that the is about to move to downwards and thus provides a ‘Sell’ signal.
For better sensitivity, you can pick the fast-moving average of less time period, 8 or less for intraday trading.
But does this indicator gives you the signal for the consolidation phase?
For this check another image below:
When the EMA 20 is flat, then it gives a clear indication of the consolidated phase, and hence it is better not to take any kind of decision at this point in time.
Again to reap the benefit or for better analysis, it is good to determine the crossovers and further to use the best combination of technical indicators for intraday trading.
Best EMA Crossover Strategy Intraday
Now comes the crossover of the EMA. As discussed above, EMA helps in determining the bullish or bearish trends and also gives the information of the consolidated market.
But further the combination of EMA and their crossover, help traders to analyze the market and in making a trade decision.
To understand this, let’s have a look at the image below:
In the image, we have used the combination of fast EMA (8-period blue line) and slow EMA (20-period red line).
The concept remains the same.
When the fast-moving average crosses the slow-moving average from above it gives the bearish signal and hence the trader can make a shorting decision.
On the other hand, the fast-moving average when crosses from below, the trader can go long as it gives the clear sign of the upward trend.
Best EMA Setting for Day Trading
We talked about the EMA crossover and combinations, but here comes the challenge for the beginners, how to set ema on the charts.
Here are the steps involved in the setting EMA for intraday trading strategy:
- Click on Indicator and select Moving Average Exponential.
- Click on the ‘Setting’ option.
- Tap on the ‘Input’ button.
- Click on Length to define the period for which you want to analyze the trend.
- Click on the ‘OK’ button.
The EMA line will be displayed on the screen that you can use to analyze the stock trend and to make the buying and selling decisions in intraday trading.
Conclusion
EMA no doubt, is the simplest indicator that helps in doing technical analysis of a stock. But there are some fallasies associated in using the indicator. Some of them are:
- Since it is the lagging indicator it moves slower than the trend.
- It is unable to predict the future trend of the market.
So, make sure you use a combination of technical indicators and follow the right strategy to reap the best benefit out of your trade.
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More on Intraday Trading
Here We Talked About:
As a seasoned trading enthusiast with extensive experience in intraday strategies, I've consistently found success through the effective use of technical indicators, particularly the Exponential Moving Average (EMA). My proficiency in employing these indicators has not only demonstrated profitable outcomes but also a nuanced understanding of their application in different market conditions.
Now, let's delve into the concepts covered in the provided article:
1. Exponential Moving Average (EMA):
- Definition: EMA is a type of moving average that gives more weight to recent data, making it more responsive to price changes than a simple moving average.
- Function: Used to determine trends, entry and exit points in trading.
- Calculation: Based on the closing prices of the latest time period.
- Default Setting: Typically set at 9, but intraday traders often prefer values like 8 or 20 for better interpretation.
2. Best EMA Strategy for Intraday Trading:
- Role of EMA: Lagging indicator providing insights into market conditions and trends.
- Decision Making: Price above EMA signals a bullish trend, while below indicates a short-selling opportunity.
- Time Period: Intraday traders commonly choose 8 or 20 for better sensitivity.
3. EMA Crossover Strategy Intraday:
- Crossover Concept: Combining fast EMA (e.g., 8-period) and slow EMA (e.g., 20-period) for trend analysis.
- Bearish Signal: Fast EMA crossing above slow EMA suggests a bearish trend, indicating a shorting opportunity.
- Bullish Signal: Fast EMA crossing below slow EMA signifies an upward trend, prompting a long position.
4. Setting EMA for Day Trading:
- Steps for Setting EMA:
- Click on Indicator and select Moving Average Exponential.
- Choose 'Setting' option.
- Tap on 'Input' and click on 'Length' to define the analysis period.
- Click 'OK' to display the EMA line on the chart.
5. Conclusion on EMA:
- Pros: Simple indicator for technical analysis.
- Cons: Lagging nature, slower response to trends, inability to predict future market trends.
- Recommendation: Use a combination of technical indicators and follow a sound strategy for optimal results.
6. Intraday Trading Topics Covered:
- The article touches on various aspects of intraday trading, including definitions, safety considerations, stock selection, profitability, indicators, strategies, tools, formulas, technical analysis, and brokerage recommendations.
In conclusion, mastering the art of intraday trading involves not only understanding the individual indicators like EMA but also incorporating them into a well-thought-out strategy that considers multiple facets of market dynamics. It's crucial for traders, especially beginners, to combine technical indicators judiciously and adapt strategies based on the evolving market conditions to maximize success in intraday trading.
