FX: What are your thoughts on EMA 5 EMA 10 crossover?

Nadine Cathleen

Nadine Cathleen

Do you have experience with it? What other indicators to you use to confirm?

I am currently using EMA 5, EMA 10 crossover as trigger and then check RSI and Stochastics. Currently trading this on the daily chart and 4h chart.

If the EMA 5 crosses above the EMA 10 and RSI and Stoch are fine, but you are below the 100 MA, would you still enter long? What if above 100 MA on the daily chart but below 100 MA on 4h chart?

Thanks!!
 
I'm not a fan of any "moving average cross". Your objective as a trader is to be "in tune with price". MA crosses are 2nd derivatives of price. By the time MAs cross, you should have had your indication for the trade sooner.
 
5/10 cross seems a little too short. The chop may erode your profits from the trends, because a 5/10 cross may not be long enough to allow the trend to "breathe." (Unless you have a separate exit rule). tradingview.com has a rudimentary backtesting system that lets you vary parameters for a MA cross system, and 5/10 barely breaks even before transaction costs on CL and EURUSD. I'm not sure how you work stochastics and RSI into the system so can't comment on that.

Most trendfollowing systems (like MA crossovers) work on longer timeframes, and have low (30%-40%) average win rates, but wins are much larger than losses.
 
Trying to base trade entries and exits on MA crossovers is extremely unwise, in my opinion.

They're reliable for the 15-20% of the time that the market is trending (and that's the 15-20% of the time that you don't need them anyway, because you can see that without indicators), and unreliable/whipsawish the other 80-85% of the time. But markets can sometimes be "trendy" for a reasonable amount of time, so it's easy to get the impression that they "work". Backtesting over 10-15 years' data typically tells a very different story.

The great mistake to avoid, in my opinion, is to adopt a philosophy of "ok, sometimes it works and sometimes it doesn't, so what we need is to use it in conjunction with other indicators to 'confirm' its signals and try to exclude a significant proportion of the times it doesn't work". Some people spend almost lifetimes trying to do this, but they're not making a living (apart from maybe by selling courses and software!), and the reality - to a skepchick like me - is that they'd actually be better off spending their time trying to prove Goldbach's conjecture (and there'd be more money in that, too!).
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I find EMAs or MAs useful to identify momentum on both long/short sides in trending market. As you can see from below ES 4-hourly chart, I use a cumulative MACD indicator to find ideal entry point and then, I use those EMAs/MAs for confirmation.
 

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Nadine Cathleen said:
Do you have experience with it? What other indicators to you use to confirm?

I am currently using EMA 5, EMA 10 crossover as trigger and then check RSI and Stochastics. Currently trading this on the daily chart and 4h chart.

If the EMA 5 crosses above the EMA 10 and RSI and Stoch are fine, but you are below the 100 MA, would you still enter long? What if above 100 MA on the daily chart but below 100 MA on 4h chart?

Thanks!!
More...

No opinion here, but you came to the right place to ask your question. Welcome. G/L.
 
humbletrader2016 said:
I find EMAs or MAs useful to identify momentum on both long/short sides in trending market. As you can see from below ES 4-hourly chart, I use a cumulative MACD indicator to find ideal entry point and then, I use those EMAs/MAs for confirmation.
More...

You just cherry picked the good entries and ignored the bad ones on looking back at this chart. This is the problem with crossovers looking back to see if it works.
 
Nadine Cathleen said:
Do you have experience with it? What other indicators to you use to confirm?

I am currently using EMA 5, EMA 10 crossover as trigger and then check RSI and Stochastics. Currently trading this on the daily chart and 4h chart.

If the EMA 5 crosses above the EMA 10 and RSI and Stoch are fine, but you are below the 100 MA, would you still enter long? What if above 100 MA on the daily chart but below 100 MA on 4h chart?

Thanks!!
More...

Crossovers? It takes some strong money management skill to make them work. All these items you listed are moving average based and much to redundant for my blood. Its all about price, time, and volume and nothing else. Many successful traders have trained themselves to just use 1. You just need to understand the market you are trading, and what price and volume is doing. But, no matter where you look, weakness in money management will put a stop to your ideas.
 
I see EMAs can be used for short term trend confirmations - never for just trading strategy. If you are getting a sell signal and the 10 EMA is under the 20 EMA, then this is a secondary confirmation of your trade alert. Something just to make you feel better about the signal.
 
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