The Moving Average is one of the simplest yet powerful tools to trade. Read further to find out which Moving Average is best used for a 15-minute chart.
One of the most critical matters that every trader must have is a trading strategy. Without a proper plan, trading might be tougher than it should be and the results can go unexpectedly. Especially for novice traders, it would be helpful to use a strategy that is simple to execute but powerful enough to gain profits.
You don't always need a super complicated or professional method to find success in trading. Instead, you only need an effective strategy. Utilizing one of the oldest and simplest trading tools called Moving Averages can be a good start. While there are many types of Moving Averages that you can choose, here we will talk about the 20 EMA.
How Does the 20 EMA Strategy Work?
The main advantage of the 20 EMA trading strategy is that it is very easy to follow even for novice traders. The only tool you need is the 20 EMA and it can be used for any currency pairs in any time frame. However, the strategy is best used when the market is in high volatility and the price is moving fast.
In a downtrend, the price is expected to go down. But at some point, you will see that the price will change direction to test the 20 EMA line. If the downtrend is strong, then the 20 EMA will be able to push the price back down. This is called a "retest" and it can happen once or a few times before it finally reaches a point where the 20 EMA is broken. So, the 20 EMA strategy basically acts as the bounce line for candlesticks. As a trader, you should wait and make use of the moment where the price retests the 20 EMA line.
See Also:Practical Use of Moving Averages: EMA-20 and EMA-60 Crossover
You only have to pay attention to one very specific candlestick. It refers to the first candlestick that heads back up and touches the EMA line after the price had been steering away from it for some time. Remember, if the next candlestick still touches the EMA line, then it is not a good signal, so you should look for another one. Once you found the right signal, it would be the right time to open a position.
Here's an example:
While that explains the setup for a Short position, you can also learn about the Long setup very easily because it is exactly the opposite. The basic principles in the 20 EMA strategy are:
- When the price is closing above the 20 EMA, then it is an uptrend. In comparison, if the price is closing below the 20 EMA, then it is a downtrend.
- The candlestick that first touches the 20 EMA after the trend has changed direction is called the signal candlestick. This is the only thing that you should pay attention to because your entry depends on the signal candlestick's Low and High.
- In an uptrend market, you should place your buy stop pending order at least 1-2 pips above the High of the signal candlestick. If the next candlestick doesn't activate your order, then you should cancel it.
- In contrast, in a downtrend market, place your pending sell stop order 1-2 pips below the signal candlestick's Low. If the next candlestick does not activate the order, you need to cancel that pending order.
- Place your stop loss a few pips (at least 5-10 pips depends on the time frame you use) below the signal candlestick for a buy trade and above the signal candlestick for a sell trade.
See Also: The Most Powerful Candlestick Patterns You Should Trade
20 EMA Trading Strategy for 15-Minute Chart
If you're into scalping or other short-term strategies, making use of a Moving Average in a 15-minute chart is quite recommended. The 20 EMA is the best moving averages to use in the 15-minute charts because the price follows it most accurately during multi-day trends. In other words, you can easily identify the trend from there.
Identify the Major Trend
Before you jump into the 15-minute chart, you should know how to identify the trend in the higher timeframe, namely the daily chart. You don't want to enter the market and risk your money while the trend is unclear, right? That is why it is important to identify the trend beforehand and make sure that it is going strong. Once you know the price direction in the daily chart, it would be much easier to find an entry in the 15-minute chart.
First, to identify the trend, you need to set up several rules on the chart. The goal is to recognize where the direction of the price is going to move. Don't worry, these rules can be used for both up and downtrends, and it also works on different time frames:
- Make sure that the price has been moving up for several days with at least one Higher Low for an uptrend and a Lower High for a downtrend.
- The price has a 20 EMA line that is pointing upwards, at a two o'clock angle or steeper for an uptrend, or a four o'clock angle for a downtrend.
- The price has significantly broken a resistance level (in an uptrend) or support level (in a downtrend).
Spotting the Entry Points
After confirming the trend, now it is time to determine your entry position. Shift to the 15-minute chart, and learn that there are two conditions that you should look for as the potential buy spots in an uptrend chart.
The first one would be the breakout over a resistance shown on the daily chart. If it is clear that the price follows the 20 EMA line, it indicates an ideal Long position. The second spot is when there is a big movement over the resistance zone. This condition is considered safer because the price has confirmed its momentum and keeps going in the expected direction. Therefore, as soon as the price hits and holds the 20 EMA, that would be a good entry spot for you.
See also: All About Forex Entry And Exit Strategy
Is the 20 EMA Ideal for Day Trading?
Yes, it is. Not only for scalping, you can also use 20 EMA in the 15-minute chart for day trading. However, in day trading, you'lltypically need a particular pattern before you start your trade and once you find one, make sure to confirm it with the support and resistance levels. The pattern itself is quite easy to recognize.
You should see either a strong down or up movement with a retrace to the 20 EMA within the first 2 hours after the market opened. Keep in mind that to keep the strategy going, you also need to check the trend on the higher time frame. If you recognize that the trend is going in the same direction as the earlier move, there is a big probability that the price will reverse at the 20 EMA.
See Also:Exponential Moving Average Strategies for Day Trading
Can 20 EMA Strategy Fail?
Like every other trading strategy, 20 EMA is not free of flaws and can potentially fail. So there are times when the price does reach a support or resistance level and still goes sideways. The price can also be moving around, completely ignoring the 20 EMA line. If you happen to come across such conditions, it would be better to stop the trade and wait for another opportunity because the market is full of uncertainties in such circ*mstances.
On the bright side, while it is possible to fail, you can actually increase your chance of success with the 20 EMA strategy. First, you can use several time frames at once to measure the strength of the trend.
For example, you can look for strong price movements on the daily and 1-hour charts, and then open a position when you find a good entry point on the 15-minute chart. Such high probability trade is a lot more profitable than only sticking with one time frame that is already used by many traders worldwide. Other than that, you can also add other tools on the chart and combine them with the Moving Average that you use.
See Also: 200 EMA Trading Strategy, Simple Yet Powerful
Conclusion
20 EMA trading strategy is a simple yet powerful strategy. Using EMA is considered to be more profitable because it sticks closer to the price compared to SMA. This means it can show a more accurate bouncing line on the chart.
The strategy is easy enough even for novice traders and it is quite effective for short-term trading in a 15-minute chart. Still, don't forget to confirm the trend on the daily chart first and pay attention to the support and resistance zones.
Even if the 20 EMA strategy can still fail at some point, you can increase the chance of winning by using multiple time frames and adding more tools to the chart. Also, the probability of getting profit is still high considering that you are trading in the same direction as the major trend that has been confirmed on the daily chart. It may take a little while to finally get the hang of it, but this simple strategy is definitely worth trying. More importantly, you should try the strategy in a forex demo account before using it in a real account.
FAQs
The best indicator to use on a 15-minute chart for optimum profits is the combination of the Supertrend indicator, the 5 EMA, and the 20 EMA. A Supertrend indicator is pretty similar to Moving Averages in the sense that it is plotted on price and can determine the current market price trends.
Which moving average is best for 15 min time frame? ›
The 20 EMA is the best moving averages to use in the 15-minute charts because the price follows it most accurately during multi-day trends. In other words, you can easily identify the trend from there.
What is the best indicator for scalping 15 minutes? ›
15-Minute Forex Scalping Strategy
The MACD is a momentum oscillator indicator that helps traders identify trend direction and whether the bullish or bearish momentum in the price is strengthening or weakening.
What is the best ADX setting for a 15-minute chart? ›
The best ADX settings for a 15-minute chart depend on the trader's preferences and trading style. However, some commonly used settings are 14 for the period, and 25 for the threshold level.
What is the most accurate moving average? ›
The 200-day moving average is considered especially significant in stock trading. As long as the 50-day moving average of a stock price remains above the 200-day moving average, the stock is generally thought to be in a bullish trend. A crossover to the downside of the 200-day moving average is interpreted as bearish.
How do you trade a 15-minute chart? ›
Trading the 15-minute chart
The essence of this technique is as follows: if the chart moves in one direction and breaks the 15-minute high, then most likely, it will continue to move (either up or down). Indicators and oscillators will also help to increase the accuracy of the analysis of a 15-minute chart.
What is the best MACD setting for a 15-minute chart? ›
The best MACD settings for a 15-minute chart are parameters 24, 52, and 18. However, this setting is only a few percent better in our case study than the default setting 12,26,9. This setting is the best for small time frames.
What is the best time frame for EMA for scalping? ›
Traders calculate the MACD scalping indicator by subtracting the 26-day EMA (exponential moving average) from the 12-day EMA, with the 9-day EMA set as the MACD default setting or signal line to mark buying and selling triggers.
What is the most powerful indicator for scalping? ›
Top Indicator Strategies for Scalping Trading
- If you are a trader, scalping indicator strategies can help you earn better profits from your investments. ...
- 1.SMA Indicator.
- 2.EMA Indicator.
- 3.Parabolic SAR Indicator.
- 4.MACD Indicator.
- 5.Stochastic Oscillator Indicator.
- 6.Average Convergence Divergence Indicator.
ADX and RSI
An RSI reading of above 70 implies overbought conditions, whereas a reading of below 30 implies oversold conditions. A buy order in a ranging market will be when the price is drifting lower, with an ADX reading of below 25, and when the RSI is showing oversold conditions.
The MACD is going to detect the trend reversals, while the ADX is showing either the trend is strong or fading.
What time frame is best for ADX? ›
The most common settings for ADX usually are a 14-period length together with a high volatility threshold at 25, and a low volatility threshold at 20. In other words, a market is thought to be volatile when ADX is above 25, and calm when it's below 20.
What is the most successful moving average strategy? ›
Exponential Moving Average (EMA or EWMA)
Exponential moving averages give more weight to the most recent periods. This makes them more reliable than the SMA and a better representation of the recent performance of the security and hence can be used to create a better moving average strategy.
Which moving average is best for scalping? ›
Place a 5-8-13 simple moving average (SMA) combination on the two-minute chart to identify strong trends that can be bought or sold short on counter swings, as well as to get a warning of impending trend changes that are inevitable in a typical market day. This scalp trading strategy is easy to master.
What are the smoothest moving averages? ›
The combination of five, eight, and 13-bar simple moving averages (SMAs) offers a perfect fit for day trading strategies. These are Fibonacci-tuned settings that have withstood the test of time, but interpretive skills are required to use the settings appropriately.
Is 15 min chart good for day trading? ›
For day trading, 15-minute charts and 30-minute charts are the best. Day traders who use indicators in their day trading strategy can use a 15-minute or lower time frame. In the case of price action-based trading, a combination of the 15-minute and 30-minute time frames is the best.
What is the 15 minute day trading rule? ›
The rule of thumb is this: If a stock gaps down below the stop that has been established, wait for the first 15 minutes (up to 9:45am EST) to trade before doing anything. Then place a new protective stop just under (adjust this amount for the volatility of the issue) the low of that first 15 minutes of trade.
What is the RSI for 15 minutes? ›
The RSI Period Setting
The default RSI period is set to 14. Here's what this conveys: On a 5 minute chart, RSI 14 signals are based on the last 70 minutes. On a 15 minute chart, RSI 14 signals are based on the last 210 minutes (3.5 hours).
Why use 9 EMA? ›
It uses 9-EMA to identify short-term market swings in the price of a security. EMA gives more weight to the recent prices, which can help traders to accurately identify market swings.
What is the 5 9 EMA strategy? ›
The 5/9 moving average rule
As in the case of any other moving average crossover strategy entry levels are when the faster moving average – in this case the 5 day EMA crosses from beneath the 9 day slower EMA. Exits in this strategy will be when the 5 day EMA crosses from above the 9 day 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.
Which indicator is faster than MACD? ›
The STC indicator is a forward-looking, leading indicator, that generates faster, more accurate signals than earlier indicators, such as the MACD because it considers both time (cycles) and moving averages.
What are the most profitable MACD settings? ›
When we apply 5,13,1 instead of the standard 12,26,9 settings, we can achieve a visual representation of the MACD patterns. These patterns could be applied to various trading strategies and systems, as an additional filter for taking trade entries. It is argued that the best MACD setting for a MACD pattern is 5,13,1.
What is the best time frame to look at MACD? ›
MACD is best used with daily periods, where the traditional settings of 26/12/9 days is the norm. MACD triggers technical signals when the MACD line crosses above the signal line (to buy) or falls below it (to sell).
What time frame do scalper traders use? ›
Scalpers usually work within very small timeframes of one minute to 15 minutes. However, the one- or two-minute timeframes tend to be favoured among scalpers. To action this strategy, you must choose a highly liquid currency pairing, and then you can open an account with us.
What is the best moving average for 5 min scalping? ›
Therefore, the exponential moving average may be considered the best moving average for a 5 min chart. A 20-period moving average will suit best. The MACD indicator is based on the exponential moving averages. Usually, it consists of two lines and a histogram.
What is the best indicator for short scalping? ›
Some of the most commonly used forex indicators for scalping are the simple moving average (SMA) and the exponential moving average (EMA). These can be used to represent short-term variance in price trends of a currency.
What is the best RRR for scalping? ›
In scalping, a 3:1 risk to reward ratio is common (although, lower risk/reward is always more favorable). This may sound backwards because it means risking $0.60 on a trade to make a $0.20 reward.
Which indicator is best for scalping boom and crash? ›
Technical indicators like moving averages, Bollinger Bands, and RSI can help confirm your entry and exit points.
What is the easiest scalping strategy? ›
A one-minute scalping strategy is a great technique for beginners to implement. It involves opening a position, gaining some pips, and then closing the position shortly afterwards. It's widely regarded by professional traders as one of the best trading strategies, and it's also one of the easiest to master.
Limitations of ADX
It is a lagging indicator. ADX may not be a good indicator for less volatile stocks, and for the more volatile ones, there may be too many false signals generated. ADX is not sufficient. It needs to be used in conjunction with other indicators for the purpose of trading.
What are the cons of ADX indicator? ›
First, it is a relatively difficult indicator to calculate. Second, when used alone, the ADX indicator can show you the wrong signals as shown above. Finally, it can only be used in some market conditions such as when the asset is trending.
What is the best combination with RSI? ›
RSI is often used to obtain an early sign of possible trend changes. Therefore, adding exponential moving averages (EMAs) that respond more quickly to recent price changes can help. Relatively short-term moving average crossovers, such as the 5 EMA crossing over the 10 EMA, are best suited to complement RSI.
What is the best combination of indicators? ›
Seven of the best indicators for day trading are:
- On-balance volume (OBV)
- Accumulation/distribution line.
- Average directional index.
- Aroon oscillator.
- Moving average convergence divergence (MACD)
- Relative strength index (RSI)
- Stochastic oscillator.
The ADX identifies a strong trend when the ADX is over 25 and a weak trend when the ADX is below 20. Crossovers of the -DI and +DI lines can be used to generate trade signals. For example, if the +DI line crosses above the -DI line and the ADX is above 20, or ideally above 25, then that is a potential signal to buy.
What is the best indicator to combine with price action? ›
The most commonly used price action indicator is the study of price bars or candlesticks which give details such as the open and closing price of a market and its high and low price levels during a specific time period. Analysing this information is the core of price action trading.
How long should ADX be for day trading? ›
Best ADX Setting For Day Trading
A lot of experts find the duration of 3-5 minutes the most appropriate one for day trading.
What is the 2 period ADX strategy? ›
In the 2-period ADX Trend Trading Strategy, we are using a 2-period ADX to catch low risk entries in a trending market. The concept underlying the 2-period ADX is to find the perfect pause in the market. By using such a short look-back period for the ADX indicator, it becomes extremely sensitive.
Is ADX leading or lagging? ›
The Average Directional Movement Index (ADX) — an indicator that measures trend strength — can help. The ADX is unique because it can work as a “leading indicator” that reveals the strength of a market's trend before a breakout move occurs.
What is the most popular moving average? ›
The most commonly used moving average is a so-called simple moving average (SMA), which is the average closing price of a given security over a specific number of days. For example, you can find a stock's 20-day SMA by adding its prices over 20 days, then dividing that number by 20.
The 14-period EMA is the fastest as it responds quickly to changing market conditions, while the 100-period EMA is the slowest and it indicates the direction of the prevailing trend.
What are the best two moving averages? ›
However, moving averages serve many purposes, for example as trend filters or for other indicators and strategies. We conclude that the two most used and known moving averages are the best: the simple moving average and the exponential moving average.
What is the best moving average crossover combination? ›
The best MA crossover strategy is the one combined with the MACD indicator for confirmed bullish or bearish signals. The Moving Average Convergence Divergence (MACD) helps in identifying if the markets are bullish or bearish, which in turn helps determine the ideal entry and exit price levels.
Which hour is best for scalping? ›
In the Forex market, the highest levels of volume and liquidity tend to occur in the London (08:00 - 17:00 GMT/BST) and New York (13:00 - 22:00 GMT/BST) trading sessions, which make them particularly attractive for most Forex scalpers.
Which moving average indicator is best for swing trading? ›
So, what are the best moving averages for swing trading? In our opinion, you can't beat the 20-day or 50-day SMA or EMA. These give swing traders all the insights they need to uncover trends and find the perfect entry/exit point.
How do you know which moving average is better? ›
A rising moving average indicates that the security is in an uptrend, while a declining moving average indicates a downtrend. The exponential moving average is generally preferred to a simple moving average as it gives more weight to recent prices and shows a clearer response to new information and trends.
What is the best moving average for uptrend? ›
Using the 50-day and 200-day moving averages together represent powerful trading signals in the market. Typically, the cross of a stock's 50-day above its 200-day moving average is a major signal that the stock has begun an uptrend.
What are the best moving average settings for short-term trading? ›
For short-term trades the 5, 10, and 20 period moving averages are best, while longer-term trading makes best use of the 50, 100, and 200 period moving averages.
What is the best time frame for EMA? ›
The 8- and 20-day EMA tend to be the most popular time frames for day traders while the 50 and 200-day EMA are better suited for long term investors.
What is the best moving average for minute chart? ›
Therefore, the exponential moving average may be considered the best moving average for a 5 min chart. A 20-period moving average will suit best. The MACD indicator is based on the exponential moving averages. Usually, it consists of two lines and a histogram.
The moving average (MA) is a simple technical analysis tool that smooths out price data by creating a constantly updated average price. The average is taken over a specific period of time, like 10 days, 20 minutes, 30 weeks, or any time period the trader chooses.
What is the most accurate moving average for day trading? ›
5-8-13 Moving Averages
The combination of five, eight, and 13-bar simple moving averages (SMAs) offers a perfect fit for day trading strategies. These are Fibonacci-tuned settings that have withstood the test of time, but interpretive skills are required to use the settings appropriately.
What are the most popular moving averages trading? ›
The most commonly used moving average is a so-called simple moving average (SMA), which is the average closing price of a given security over a specific number of days. For example, you can find a stock's 20-day SMA by adding its prices over 20 days, then dividing that number by 20.
What is the EMA 20 50 strategy? ›
A common trading strategy utilizing EMAs is to trade based on the position of a shorter-term EMA in relation to a longer-term EMA. For example, traders are bullish when the 20 EMA crosses above the 50 EMA or remains above the 50 EMA, and only turn bearish if the 20 EMA falls below the 50 EMA.
What is the EMA 21 strategy? ›
The 21-day exponential moving average (EMA) can be a powerful tool for investors. Though it is most powerful in a bull market, it has plenty of use during bear markets as well. Like the commonly used 50-day moving average, the 21-day takes the closing prices of the past 21 sessions and averages them out.
Which EMA is best for scalping? ›
In a scalping strategy, a buy position must match the following criteria: To establish a buy position, we must wait for the 50 EMA (Exponential Moving Average) to cross above the 100 EMA.
What is the best MACD setting for a 15 minute chart? ›
The best MACD settings for a 15-minute chart are parameters 24, 52, and 18. However, this setting is only a few percent better in our case study than the default setting 12,26,9. This setting is the best for small time frames.
What is the 9 EMA scalping strategy? ›
The 9-EMA strategy is a technical analysis strategy that uses the 9-day exponential moving average (EMA) to generate buy and sell signals for trading securities. It uses 9-EMA to identify short-term market swings in the price of a security.
What is the 5 EMA strategy? ›
This strategy very simple it detect the reversal of trend. whenever the candle settle above the 5 EMA without touching the candle body / Low / High to 5 Period EMA , it detect the candle and draws the signal.
Which moving average is faster? ›
A short term moving average is faster because it only considers prices over short period of time and is thus more reactive to daily price changes. On the other hand, a long term moving average is deemed slower as it encapsulates prices over a longer period and is more lethargic.
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.
